Amendment to the Trust Constitution to allow for adoption of the Attribution Managed Investment Trust ("AMIT") regime for the Trust
Notice under section 601GCB(2) of the Corporations Act 2001 (Cth)
This notice is published by Stockland Trust Management Limited (ACN 001 900 741) (“Responsible Entity”) under section 601GCB(2) of the Corporations Act 2001 (Cth) as modified by ASIC Instrument 2016/489 to inform members of the Trust that the constitution of the Trust (“Constitution”) was amended by Supplemental Deed on 25 August 2017. The amendments are in connection with the new tax regime applying to managed investment trusts which satisfy the requirements to be AMITs, which was introduced by the Tax Laws Amendment (A New Tax System for Managed Investment Trusts) Act 2016 (Cth) (“AMIT Regime”).
AMIT Regime
The AMIT Regime is a set of rules for the taxation of managed investment trusts and their members. One of the aims of the AMIT Regime is to provide greater certainty than the current rules in relation to the taxation position for managed investment trusts and their members.
One key aspect under the AMIT Regime is that the Responsible Entity must allocate or “attribute” the taxable income of the Trust to members on a fair and reasonable basis. Currently, members are subject to tax on their proportionate share of the taxable income of the Trust based on the share of the income of the Trust according to trust law principles that they are presently entitled to.
The AMIT Regime may provide the following potential benefits for members of an AMIT:
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Greater clarity and certainty associated with the tax treatment of distributions and the character of income and capital of the AMIT, in contrast to the current “present entitlement” regime. In particular, a removal of the potential for double taxation that may arise for members where there are mismatches between the amount distributed and the taxable income of the AMIT.
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If a variance is discovered between the amounts actually attributed to members for an income year, and the amounts that should have been attributed, the variance can be attributed in the income year in which it is discovered by the responsible entity, rather than amending previous years' tax returns and notifying members of those amendments.
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An AMIT will be deemed to be a “fixed trust” and members will be treated as having vested and indefeasible interests in the income and capital of the AMIT throughout the income year, which can be relevant for:
- utilising trust losses; and
- applying the franking credit provisions.
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Where a member receives a distribution of cash that is less than their allocated share of the taxable trust components, members will be entitled to make upward adjustments to the cost base of their units in the AMIT.
Effect of the changes to the Constitution
The Constitution amendments have enabled the Responsible Entity to operate the Trust under the AMIT Regime.
A decision was made that the Trust would adopt the AMIT regime for the year ending 30 June 2018 onwards. When the AMIT Regime applies to the Trust, the key difference between the previous tax regime which applied to the Trust and the AMIT Regime is that under the AMIT Regime, unit holders are taxed on the taxable income that is allocated or “attributed” to members by the Responsible Entity. The AMIT Regime requires the Responsible Entity to undertake this allocation or attribution on a fair and reasonable basis. This is in contrast to the previous rules, which provided for unit holders to be subject to tax to the extent, proportionately, that each unit holder was “presently entitled” to the income of the Trust according to trust law principles.
Details of the amendments to the Constitution are summarised in the table below, and a copy of the amended Constitution can be found on this page.
| Constitution clause | Description of the amendment |
|---|---|
| Clause 9.7 |
Net Income A new clause 9.7 was inserted which provides that the Manager may establish principles to determine the manner in which trust components are allocated to members. |
| Clause 9B |
AMIT Regime A new clause 9B was inserted which contains the provisions for the operation of the Trust as an AMIT under the AMIT Regime, including to:
|
| Clause 11.12 |
Powers in respect of the AMIT Regime A new clause 11.12 was inserted to specify the general rights and powers of the Responsible Entity to enable the Trust to be eligible to apply the AMIT Regime, be properly administered and operated under the AMIT Regime and for the Responsible Entity to comply with the AMIT Regime. |
| Clause 17.3 |
Limitation on Manager’s liability A new clause 17.3 was inserted which specifically provides that the Responsible Entity does not incur any liability as a result of an exercise of any power or discretion under the AMIT Regime. |
| Clause 17.4 |
Indemnity in favour of Manager Clause 17.4 has been amended to clarify that the Responsible Entity is entitled to be indemnified for any liability incurred by it in properly performing or exercising its powers or duties under the AMIT Regime. |
| Clause 18.7 |
AMIT Indemnity A new clause 18.7 was inserted which provides for each member to indemnify the Responsible Entity in relation to any tax and any other costs, expenses or liabilities incurred as a result of being liable to such tax, that may become payable by the Responsible Entity under the AMIT Regime, which the Responsible Entity reasonably determines relates to the member or units held by the member. |
The AMIT Regime is a tax system which commenced on 1 July 2016. The AMIT Regime seeks to reduce complexity, increase certainty and minimise compliance costs for eligible managed investment trusts (“MIT”) and their members. A trustee of a MIT may elect into the AMIT Regime.
Stockland Trust Management Limited (“STML”) as responsible entity for Stockland Trust has elected into the AMIT Regime.
Prior to the introduction of the AMIT Regime, different types of trusts (e.g. family trusts and MITs) were subject to the same tax system. This tax system contains a number of uncertainties and unnecessary administration costs for MITs in practice. The AMIT Regime is intended to address these issues, as well as provide greater flexibility in the tax affairs of MITs.
Therefore, STML as responsible entity of Stockland Trust has elected into the AMIT regime effective from the year ended 30 June 2018 onwards, to take advantage of the greater certainty and legislative protection afforded under the AMIT Regime in respect of its operation and administration.
Stockland Trust has applied the AMIT Regime from 1 July 2017. STML’s decision to elect Stockland Trust into the AMIT Regime is irrevocable.
The overall manner in which income of Stockland Trust is taxed should not change. Similar to how income of Stockland Trust has been taxed under the former tax system:
- Stockland Trust should not be subject to tax.
- An Australian resident Stockland Trust member will be taxed on their share of Stockland Trust’s taxable income for the tax year to which the taxable income relates (not necessarily in the year in which it is received).
- A non-resident Stockland Trust member will have withholding tax deducted from their share of Stockland Trust’s taxable income for the tax year to which the taxable income relates.
The AMIT Regime provides for a number of changes, including:
- The way in which an AMIT’s taxable income can be allocated to members under the Australian tax legislation.
- The calculation of adjustments to a member’s cost base in their units.
- An AMIT being deemed to be a fixed trust for Australian tax purposes (which can be relevant to the utilisation of trust losses).
- Allowing AMITs to choose how to manage under and over estimates of tax amounts (these can generally either be carried forward into the “discovery income year” or dealt with in the year in which the under or over estimate arose).
Further details of two of these key changes are set out below:
Allocation of Trust Taxable Income
- The AMIT Regime replaces the concept of “present entitlement” (broadly, this concept relied on the trustee determining to make a distribution of trust income to members) with the concept of “attribution”, which means that STML as the responsible entity for Stockland Trust must “attribute” (i.e. allocate the tax components of the trust to its members on a fair and reasonable basis).
- In practice, STML will continue to attribute the components of taxable income to security holders in the same manner as previously done (i.e. as a proportion of total cash distributed to members, unless the responsible entity notifies the members otherwise).
Changes to Cost Base
- Under the former tax system, where members received a “tax deferred” distribution (now referred to as "AMIT cost base adjustments"), the cost base of their securities for capital gain tax purposes would be reduced accordingly. There was no mechanism for an increase in cost base.
- Under the AMIT Regime, there is both a mechanism for a reduction in cost base in the event of “tax deferred” distributions, along with a mechanism for an increase in cost base where members receive distributions that are less than their share of Stockland Trust’s taxable income. This ensures that if income or capital gains are retained within the Stockland Trust, there should be a cost base increase to reflect this.
You will continue to receive a single statement (now referred to as an AMIT Member Annual Statement or “AMMA statement”) covering all distributions in respect of your Stockland Trust securities.
No. You will report the different components of your share of Stockland Trust’s taxable income in the same way you were required to do so under the previous tax system.
No. No changes to Stockland Trust’s distribution policy will be implemented as a consequence of applying the AMIT Regime.
No. STML as responsible entity for Stockland Trust resolved in August 2017 that Stockland Trust would elect into the AMIT Regime with effect from 1 July 2017.
A notice setting out the changes to Stockland Trust’s constitution to facilitate the entry into the AMIT Regime along with the amended constitution have been published on Stockland’s website and can be found on this page.