AUSTRALIA Trends and Developments Contributed by: Andrew Stone, Dhanushka Jayawardena, Andrew Choi and Chris Kinsella, Holding Redlich
Ultra-high net worth individuals increasingly establish family offices to manage intergenerational wealth and these entities are becoming more active in private markets. Private wealth investors (including family offices and wealth managers) accounted for 24% of commit - ments in funds with vintages between 2022 and 2024, compared to 22% for 2019‒21 vintages and just 8% for 2016‒18 vintages. Superannuation fund consolidation While family offices have grown in number, superan - nuation funds remain major capital allocators despite consolidation reducing their count from 188 to 111 Australian Prudential Regulation Authority (APRA)- regulated entities between 2018 and 2023. These funds maintain AUD2.9 trillion in AUM, with approxi - mately AUD500 billion invested in unlisted assets. The consolidation trend has created larger, more sophisticated funds with greater capacity for alterna - tive investment due diligence and allocation. However, it has also increased concentration risk, as fewer deci - sion-makers control larger pools of capital. Open-ended fund demand The growth in high net worth investors has driven demand for open-ended fund structures that provide greater liquidity and transparency than traditional closed-end alternatives. Fund managers are respond - ing by creating more open-ended products across asset classes, with private credit leading this trend. Recent examples include Pantheon’s launch of two secondaries-focused open-ended funds and Roc Partners’ establishment of a new open-ended fund targeting AUD1 billion in assets. These structures allow continuous investment and redemption, appeal - ing to investors seeking alternative exposures with traditional mutual fund-like characteristics. Impacts of changing Australian tax policy Shift to earnings-based thin capitalisation rules Australia replaced its old asset gearing-based thin capitalisation rules with earnings-based interest limi - tation tests for most groups. These rules are now in
effect and apply to income years commencing on or after 1 July 2023. Leveraged buyouts, private credit, and highly geared infrastructure deals now face a materially lower deductibility ceiling in many situations. Structures that previously relied on high intra-group debt or world - wide gearing must retest their debt levels against new earnings-based tests. Transfer pricing interaction is now critical, as interest can also be denied under the transfer pricing rules. More denied interest deductions in tax returns, longer carry-forward computations, and heavier documenta - tion and benchmarking of arm’s length debt will likely see a rise in the demand for equity-funded structures rather than debt-funded structures. Increased ATO scrutiny of MIT restructures In March 2025, the Australian Taxation Office (ATO) issued a taxpayer alert concerning certain restructures undertaken to access the concessional managed investment trust (MIT) withholding regime. The Aus - tralian government subsequently announced amend - ments to ensure genuine, widely held foreign investors can still access concessional MIT rates, even though artificial restructures will be scrutinised. Funds that enter into restructures to access lower MIT withholding tax rates will be under increased scrutiny. Trustees should seek to strengthen commercial ration - ale papers, tighten deed mechanics, re-examine the satisfaction of pooling and ownership tests, and revisit MIT documentation. Stakeholders should also monitor potential legislative clarifications that preserve genu - ine pensions but target contrived schemes. Expansion of foreign resident CGT regimes Treasury published a consultation paper in July 2024 proposing to broaden the capital gains tax (CGT) scope of foreign residents in order to capture direct and indirect disposals with a close economic con - nection to Australian land and resources. The Austral - ian government later deferred the commencement of these reforms until late 2025. These proposals remain in consultation but should be closely monitored.
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