Mutuals unstuck by CGT changes
US mutual funds will have some more work to do as part of their roll out in re-sponse to the capital gains tax (CGT) provisions incorporated in the Ralph Review.
US mutual funds will have some more work to do as part of their roll out in re-sponse to the capital gains tax (CGT) provisions incorporated in the Ralph Review.
Due to the nature of the US funds any returns to investors are in the form of divi-dends as opposed to local funds which return funds as distributions.
Under the proposed changes the US returns will still feel the full weight of CGT, up to 48.5 per cent for high income earners, while local funds while only bear half that rate, 24.25 per cent, for the same income group.
Alliance Capital and Merrill Lynch Asset Management have already launched funds and are now seeking ways to minimise the impact of the CGT proposals in a bid to restore a competitive edge.
Merrill Lynch Mercury Asset Management retail business manager David Skelton says the relaxation of the FIF laws provided a positive environment for the mutual funds but the CGT changes were not mentioned.
"We started our research some time ago, in April of this year while these proposals are only new with the Ralph Review."
"Obviously if we had known this would occur and been told of the effect we would have taken a different approach back then," Skelton says.
Skelton says the Ralph Review is still in proposal form and lobbying is in place to show the government the consequences of the proposals.
"I think we will receive a warm response because it defeats the whole purpose of the FIF laws."
The FIF legislation was passed in June this year to allow tax US domiciled funds to enter Australia and compete on an equal footing with local funds.
AUTHOR
Jason Spits
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