• Service: Tax, Corporate Tax
  • Industry: Financial Services
  • Type: Regulatory update
  • Date: 17/06/2014

Tax Insights

KPMG's analysis of tax issues and developments.

Stephen Murphy

Stephen Murphy
Partner, Tax

+61 2 9335 8873

MIT and foreign pension funds: ATO confirms administrative relief 

by Stephen Murphy, Financial Services Specialist

The Managed Investment Trust (MIT) provisions were introduced with effect from 1 July 2008, enabling certain foreign investors to access concessional withholding tax rates. Whilst the original provisions introduced reductions in withholding tax to a phased in rate of 7.5 percent, subsequent amendments resulted in the withholding tax rate applicable of 15 percent (or 10 percent in respect of certain fund payments related to certain buildings meeting specified ratings).

In 2012, the Australian Tax Office (ATO) published an ATO ID that concluded a foreign pension fund organised as a trust could not satisfy conditions necessary to access the concessional MIT withholding tax rate in relation to fund payments from various MITs. This conclusion arose because the foreign pension fund received the fund payment as a beneficiary in the capacity of a trustee of another trust (the other trust being the foreign pension fund) and no other person was beneficially entitled to this income.


On 13 February 2012, David Bradbury, then Assistant Treasurer, announced the government would amend the income tax law to ensure that foreign pension funds could access the MIT withholding tax regime. The change would operate retroactively from 1 July 2008. However no legislation implementing the announced change was enacted.


On 6 November 2013, Joe Hockey, Treasurer, announced the government would proceed with the amendment as part of the review of previously announced and un-enacted tax and superannuation changes.


On 28 May 2014, the ATO issued a media release confirming that taxpayers who apply the legislation based on the proposed changes need not do anything further, and that the ATO would accept returns prepared in accordance with the announced changes. This is a welcome announcement that accords with industry practice and provides more certainty to taxpayers affected by the amendments. We await with interest the draft legislation to enact the proposed amendments.


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