AUSTRALIA Law and Practice Contributed by: Andrew Stone, Dhanushka Jayawardena, Andrew Choi and Chris Kinsella, Holding Redlich
sion of the base. New thin capitalisation rules limit - ing interest deductibility when interest cover exceeds 30% of tax EBITDA significantly impact leveraged buyout structures, while proposed foreign resident capital gains tax (CGT) reforms target non-residents disposing of direct or indirect interests in a broadened definition of Australian land. The Australian Taxation Office has intensified scrutiny of MIT structures expressing concerns about arrange - ments that inappropriately restructure existing trust or investment structures to access the concessional MIT withholding tax rates, particularly where restructures lack commercial rationale. Concurrently, the Austral - ian government has deferred measures to extend clean building MIT withholding tax concessions to data centres and warehouses. In view of the ongoing concentration of public markets in Australia, alternative investment strategies are seen as having an important role to play in the Australian economy. The regulatory environment shows tension between maintaining competitiveness and preventing base erosion. It is hoped that regulatory support for the alternative funds industry in Australia will encour - age investment. 2. Funds 2.1 Types of Alternative Funds and Structures Alternative funds are commonly established for real estate, infrastructure, private equity (including venture capital), private credit and hedge fund strategies. Unit trusts are the most typically used structure for alternative funds, as they provide greatest flexibility in relation to permissible investments. They are not subject to restrictions on the asset classes in which the fund may invest in, restrictions on the quantum of such investments, or any rules regarding compulsory diversification of the investment portfolio or the total fund size. Venture capital limited partnerships (VCLPs) and early- stage venture capital limited partnerships (ESVCLPs) are often used for eligible venture capital investments (EVCIs), which excludes investing in entities whose
predominant activities include property development, land ownership, leasing, providing capital to others, and the construction or acquisition of infrastructure. Tax concessions can be applicable to foreign inves - tors in those structures, including an exemption from income tax on profits (both income and capital). CCIVs can also be used, but this structure is far less common. These were seen as an alternative to AMITs by offering the same tax profile but in a corporate setting. As the regime was introduced sometime after AMITs became widely adopted in the Austral - ian funds management industry and it offered fewer other advantages, most fund managers have found it unnecessary to restructure their arrangements into the newer regime or disturb mature holding structures by holding newly established corporate entities. 2.2 Regulatory Regime for Funds Unit Trusts That Are Unregistered Managed Investment Schemes The establishment of a unit trust does not of itself require any regulatory approval, if structured as an unregistered managed investment scheme. Unit Trust Established as a Registered Managed Investment Scheme If a unit trust is to be a registered managed investment scheme, ASIC must consent to the registration. ASIC must register the scheme within 14 days of receiving an application that satisfies the requirements speci - fied by Australian legislation. The trustee of an Australian unit trust must hold an Australian Financial Services Licence (AFSL) or have the benefit of a relevant exemption from the require - ment to hold an AFSL. An application for an AFSL can be lodged with ASIC, which aims to decide 90% of complete applications within 240 days. Licensed trus - tee businesses operate in Australia and can under - take the role of trustee of an Australian unit trust. The investment management function in relation to such a unit trust can be undertaken by a professional invest - ment manager unrelated to the trustee.
12 CHAMBERS.COM
Powered by FlippingBook