Corporate collective investment vehicles – new regime in effect

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Corporate Collective Investment Vehicles Framework and Other Measures Bill 2021 (Cth) (Bill CCIV) received royal assent on February 22, 2022. The CCIV bill sets the regulatory and tax framework for a new type of investment entity, called a collective investment vehicle (CCVI). The CCIV scheme comes into force on July 1, 2022.

CCIVs have the legal form of a company

The CCIVs will have the legal form of a public limited company.

As a type of company, a CCIV has the legal capacity and powers of a company, which is legally considered a separate person.

A CCIV must be led by a single corporate officer and, very broadly, must not have other officers or employees.

A CCIV is a vehicle with compartments which comprises one or more “compartments”, each of which is similar to a separate mutual fund. Although each compartment does not have a separate legal personality, its assets and liabilities would be separated from the assets and liabilities of the other compartments.

Tax transfer for CCIVs

CCIVs may be entitled to transfer treatment from an Australian income tax perspective. This is a feature previously only available to certain types of partnerships and trusts.

The transfer tax treatment is, very broadly, that where CCIV investors are taxed on their share of the taxable income of the sub-fund in which they have invested (see below), and not the CCIV itself. This can be particularly important for certain types of transactions, such as project finance transactions, where such treatment generally results in a higher amount of debt financing because there is more cash flow available for service. debt.

Australian income tax pass-through treatment is achieved by treating each sub-fund as a separate unit trust for Australian income tax purposes, with the CCIV being the notional trustee of each sub-fund and the members of the sub-fund as beneficiaries. Very generally, provided that the investment trust under management by attribution (AMIT) are satisfied with respect to the “trust” of the relevant CCIV compartment, the compartment should be treated as an AMIT (with certain modifications), so that the taxation of each compartment would be broadly aligned with these existing rules.

CCIVs are likely to be welcomed by many foreign investors. In particular, this is because many jurisdictions around the world do not have trust regimes or do not make extensive use of their trust regimes. Consequently, investors in these jurisdictions often face significant difficulties in investing in Australian trusts, as it is an unfamiliar investment vehicle and their legal and tax regimes may not readily accommodate such investments.

A new era in investing in Australia

In line with the intent of the policy, the CCIV regime is expected to enhance the competitiveness of the Australian managed investment trust industry and attract inward investment to Australia.

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