Bert Van Manen (Forde, Liberal Party) Share this | Hansard source

It is always a pleasure to follow the member for Fraser in this House. It is interesting to listen to his contribution and reflect on the record of those opposite on tax reform in their time in government. What the member for Fraser neglected to tell the Australian people is that their record of tax reform involved increasing all sorts of taxes, fees and charges. It did not involve reducing them, it involved increasing them. And from what we have seen in the last little while with Labor's various policies going forward to try and fund some of their unfunded promises, again we are not going to see any reduction in taxes, we are going to see increases to fund more and more spending. What this country needs is a debate about reducing the level of government spending and reducing the level of tax that we collect as a result so we can free up our economy to be productive and grow and be competitive on the world stage.

I rise today to speak in support of the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Bill 2015, and related bills, which seeks to introduce a new tax system for taxing managed investment trusts. This bill plays an important role in providing the right domestic platform to enable the financial services sector to expand and grow. We all recognise that in this country we have a history of being able to develop and grow our economy based on the investment of foreign capital. According to the Financial Services Council this new regime will provide certainty and clarity for eligible managed investment trusts and their investors in relation to many longstanding technical taxation issues.

The implementation of a new tax system follows recommendations made by the Board of Taxation in its report on the review of tax arrangements applying to MITs. In November 2013 the coalition government announced it would progress the new tax system for MITs, which was actually one of Labor's 92 announced but unlegislated taxation measures. A managed investment trust is a collective investment vehicle. It allows investors to pool their funds and have that pool of funds invested by a professional fund manager. To be a managed investment trust the trust must meet certain criteria. It must be widely held and it must be a managed investment scheme under the Corporations Act 2001 and invest in assets that earn mainly passive income—for example, rent, dividends and interest.

The coalition government is introducing these bills to modernise the tax rules for managed investment trusts. The new tax system will address longstanding uncertainty and complexity in the rules applying to managed investment trusts and, by extension, investors in those trusts. It will significantly reduce compliance costs for managed investment trusts by $30 million per year and also make compliance for investors more streamlined and straightforward.

In developing the new tax system, extensive consultation was undertaken with representatives from the funds management industry, the property sector, the custodian service industry, the legal profession and the taxation advisory firms on the draft legislation and guidance material from the Australian Taxation Office. In this instance, it has demonstrated again that, through a consultative process, you can come up with good policy. Maybe those opposite could learn from that and their time in government. The ATO will issue finalised guidance material when the new rules commence to provide industry with greater level of certainty on the practical tax implications arising from the new tax system.

The Tax Law Amendment (New Tax System for Managed Investment Trusts) Bill 2015 and related bills will make it easier for managed investment trusts to offer different investment products through a single trust and give trustees practical options for reporting income to members.

Introducing this new tax system will not only enhance the competitiveness of Australia's funds management industry but will also help attract more investment in Australia, including in the area of infrastructure. So why is this important? It is important because will help make Australian fund managers more internationally competitive and promote the greater export of their funds management expertise. And we would note in this House that one of the key outcomes of the free trade agreements with Japan, Korea and China is the access that our services sector has got to those economies. We lead the world in some of these areas—funds management, aged care and professional advice. This whole new area of business has been opened up by this government through its ability to negotiate these free trade agreements.

And this piece of legislation helps to provide even greater access and opportunities for foreign investors to invest in this country and also for us to export our expertise in this sector. The managed investment trust system will encourage Australia's managed investment funds industry to grow not only by developing it locally but by exporting more of its expertise and attracting additional inflows of investment. This in turn creates the opportunity for greater economic growth here in Australia and that greater economic growth creates the opportunity for jobs for Australians.

These new rules recognise the commercial needs of the industry by more closely aligning the commercial and tax consequences of the activity of the managed investment trust. This allows managed funds to operate more flexibly through these trust structures. The new rules will apply from 1 July 2016; however, trusts can choose to opt in early and apply the rules for the income years starting on or after 1 July 2015. The new tax system will apply where the members of the trust have clearly defined interests in relation to income and capital of the trust and the trustee of the managed investment trust makes a choice to apply the new rules. This requirement ensures that the new rules can operate transparently and with integrity.

It is expected that some MITs will choose to apply the new rules from 1 July 2015. A number of stakeholders have indicated that they typically will need between 12 and 18 months from the time the bills are passed through the parliament to update their systems and trust deeds. The elective nature of this regime provides MITs with the flexibility to manage their transition in a sensible way. Trusts that are not eligible or choose not to apply the new tax system will continue to have the general trust tax rules applied.

The reforms in these bills have been carefully designed to ensure an appropriate balance between simplifying the tax arrangements applying to trusts and the continuing need to maintain the integrity of our taxation system. This new taxation system is estimated to have a cost to revenue of about $125 million over the forward estimates but stakeholder comments have been very positive. This series of bills is just another example of this government having listened to stakeholder feedback and taken the time to get the new bills right. These new rules and the increased incentive for our managed investment trusts and our professional financial services industry to expand their opportunities give great opportunities for our economy to grow and prosper for the future. I commend these bills to the House.

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