Managed Investment Trusts and foreign investment
Managed Investment Trusts and foreign investment
The Australian Managed Investment Trust (MIT) structure was designed to encourage and attract passive foreign investment in Australia by providing foreign investors access to a concessional withholding tax regime.
Foreign investors resident in a country that has an effective Exchange of Information Agreement with Australia on taxation matters can access a concessional 15% MIT withholding tax rate on eligible distributions from an MIT. Distributions from certain MITs that hold a ‘clean building’ are eligible to apply a further reduced withholding tax rate of 10%.
Clean building MITs
The Government has deferred the start date of its previously announced Extending the clean building managed investment trust withholding tax concession from 1 July 2025 to the first 1 January, 1 April, 1 July or 1 October after the Act receives Royal Assent.
As part of Federal Budget 2023, the Government previously announced that the clean building MIT withholding tax concession would be expanded to include clean buildings that are data centres and warehouses where construction commences after 7:30pm AEST on 9 May 2023.
The previously announced measure was also expected to raise the minimum energy efficiency requirements for existing and new clean buildings to a 6-star rating from the Green Building Council Australia, or a 6-star rating under the National Australian Built Environment Rating System (NABERS).
Under the current MIT regime, a clean building is an office building, hotel, or shopping centre that has at least a 5-star rating from the Green Building Council Australia, or a 5.5-star rating under the NABERS.
Clarifying tax arrangements for MITs
The Government also announced that it will amend the tax laws to ensure genuine foreign investors can continue to access the concessional MIT withholding tax rates, whilst strengthening guidelines to prevent their misuse. This measure will apply to MIT fund payments from 13 March 2025.
The amendments will clarify that MITs ultimately owned by a single widely-held investor, such as foreign pension funds, are eligible to access the concessional withholding tax rates. These amendments are expected to include integrity measures to complement the ATO’s current concerns on non-commercial restructures implemented to inappropriately access the concessional MIT withholding tax rates.
BDO comment
The clean building measures were expected to be part Australia’s investment in energy-efficient commercial buildings and broader net-zero strategy. It is disappointing that the Government could not enact its Budget announcement from two years ago and pass relatively straightforward legislative amendments to expand the definition of a clean building and to increase the ‘green’ ratings threshold.
BDO supports the proposed MIT integrity measures to ensure that the concessional withholding tax rates are not misused and ensuring that legitimate foreign investors are not penalised by losing access to the concessional tax rates via too-broad legislative changes to the MIT regime. This will be crucial to ensure Australia continues to attract much needed foreign investment in its infrastructure.