An important reform to financial services, Corporate Collective Investment Vehicle (or CCIV) came into operation on 1 July this year. The CCIV will provide, for the first time, an Australian investment vehicle that combines the corporate legal framework of a company with flow-through tax treatment.
Previously, Australia only had companies (without flow-through tax), or trusts (with flow-through tax treatment).
The CCIV is something the FSC had been supporting for some time, and we warmly welcomed its delivery. However, the work is not yet completed. Much more needs to be done to ensure the CCIV delivers on its promises of promoting Australia’s funds management expertise to the region.
The most pressing issue is the introduction of a comprehensive regime to facilitate an existing fund becoming a sub-fund of a CCIV. Such a regime will need to remove any tax impediments to transition – particularly ensuring Capital Gains Tax (CGT) isn’t imposed on investors or funds when they convert into CCIV sub-funds. Also, simple rules are needed to maintain customer protections on the transition, and ensure existing assets and legal contracts are automatically transferred to the CCIV.
In addition, several CCIV tax issues need addressing – in particular, the CCIV tax rules currently ‘deem’ a CCIV sub-fund to be a trust for tax purposes. This causes problems because the whole goal of the CCIV was to have an investment vehicle that did not look or act like a trust; but the tax rules mean this goal is not completely realised. Not only will this make the CCIV less acceptable in the region, it will also cause issues for tax agreements (called tax treaties) with other countries and may mean in some cases the flow through tax treatment of a CCIV may be lost.
The FSC has proposed changes to the CCIV tax rules to remove this issue, without risking any tax revenue.
The FSC is working with the Australian Securities and Investments Commission (ASIC), the Australian Taxation Office, and Treasury on these issues.
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