A Senate committee has given the greenlight to a bill that would introduce long promised collective investment vehicles in Australia and to defer the taxation point of employee share schemes.
The new regime aims to make the managed fund industry more competitive globally and is set to start in July.
The proposal would amend corporations, financial services and taxation laws to establish a new type of corporate structure under Australian law, known as the Corporate Collective Investment Vehicle (CCIV).
The objective of a CCIV framework is to increase the competitiveness of Australia’s managed fund industry with internationally recognisable investment products because the current trust structure used in Australia is not well understood elsewhere.
On Thursday the Senate Economics Committee released its report on a government bill introduced in November to introduce a CCIV.
The committee, led by Liberal Senator Paul Scarr, found there was “overwhelming support” for the CCIV regime and recommended the bill be passed as soon as practicable to allow a July implementation.
A CCIV regime was proposed in 2009 and quickly endorsed by the Board of Taxation. The 2016 federal budget committed to introducing collective investment vehicles from 2017 but this never happened.
Treasury reportedly put collective vehicles in the “too hard” basket when the Hayne royal commission put its resources towards superannuation and financial advice policy.
Investment and financial service groups have continued to advocate for a CCIV, warning it can be the difference in global investors choosing Australia or another market.
However, the bill’s Regulation Impact Statement said variables made it too difficult to estimate the monetary value and net benefits of aa CCIV to Australia. Regulatory costs are estimated to be $1.2 million, borne mostly by businesses.
The committee said the changes would not impact tax outcomes significantly
While several improvements were recommended to the current proposal, the committee agreed their introduction should not slow the legislation.
The bill also removes cessation of employment as a taxing point for Employee Share Schemes (ESS) interests which are subject to deferred taxation.
The Tax and Revenue Committee made this recommendation last year, due to the evidence that they received that Australian firms were being disadvantaged when competing for global talent, as the point at which ESS interests are taxed were ‘no longer best practice’ and less favourable than arrangements overseas.
The change is expected to cost $550 million over the forward estimates, according to the bill’s explanatory memorandum.
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