AUSTRALIA Law and Practice Contributed by: Michael Lawson, Nicole Brown, Lizzie White and Tamaryn Leach, MinterEllison
Generally, a resident trust should be able to qual - ify for the benefits of a double tax treaty between Australia and a foreign jurisdiction. However, this should be considered on a jurisdiction-by-juris - diction basis. CCIVs The new CCIV structure has been designed to provide tax treatment that aligns with the existing tax treatment of Attribution Managed Investment Trusts (AMITs). Investors in a CCIV sub-fund will receive the same tax treatment as those in an AMIT, including “flow-through” tax treatment.
offshore entity or a locally established (usually an Australian proprietary company limited by shares) subsidiary of an offshore manager. The investment manager, whether locally established or offshore, would generally need to obtain an AFSL or be able to rely on a relevant exemption. Please see 3.3.3 Local Regulatory Require- ments for Non-local Managers for further dis- cussion regarding the local regulatory require - ments for offshore managers. Key Advantages and Disadvantages of Unit Trusts Some of the key advantages of unit trusts are outlined below. • Tax “flow-through” – unit trusts that have passive investments (and do not have active businesses) are typically managed as a flow-through vehicle for tax purposes, which means that, unlike a company, a unit trust does not itself pay tax. Rather, the unit hold - ers of the unit trust will pay tax on their pro - portional share of the distributions to them. • Asset protection – unit trusts offer additional asset protection from internal and external parties as the assets of the unit trust are held by the trustee on trust for the unit holders. The trustee is also subject to fiduciary and (as a responsible entity) statutory duties, includ - ing acting in the best interests of unit holders. The perceived disadvantages of unit trusts include the following. • Unit trusts are not common offshore – unit trusts tend to be creatures of common law jurisdictions, and hence, they are often only used or well understood in some offshore jurisdictions. • No separate legal identity – unlike a company, a unit trust is not itself a separate legal entity
3. Retail Funds 3.1 Fund Formation 3.1.1 Fund Structures Unit Trust
The most commonly used structure for retail funds in Australia is a unit trust. Each unit enti - tles the unit holder (ie, the investor) to a benefi - cial interest in the trust property as a whole but not in any particular asset comprising the trust property. The trustee (which, in the context of retail funds, is referred to as a responsible entity) is responsi - ble for the operation and management of the unit trust. As retail funds are regulated in Australia, the Corporations Act requires that the responsi - ble entity be an Australian public company that holds an AFSL. For this reason, offshore manag - ers looking to establish an Australian retail fund will often choose to engage a local responsible entity to manage the fund instead of creating their own responsible entity in Australia. The responsible entity may then appoint an investment manager to oversee the fund’s assets. The investment manager can be an
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