Tax changes boost foreign interest in MITs

The Australian funds management industry will experience substantial growth as a result of Federal tax changes, with joint ventures expected between local and overseas companies.

This was according to The Trust Company’s general manager of business development, Andrew Cannane, who said that his company had already seen an increase in enquiries from international companies looking for assistance on structuring managed investment trusts (MITs).

While Australia was already a popular investment destination, changes to the Federal tax regime last year aimed at attracting foreign investment have boosted Australia’s global competitiveness as well as its investment management industry, Cannane said. He said an important feature of the MIT was that a substantial proportion of the investment management related to Australian assets in the trust had to be performed in Australia.

“The fact is you either have to seconde staff down to Australia, joint venture with an Australian manager that will perform those functions for you, or you need to outsource those functions to a service provider,” said Cannane, adding that every MIT was therefore creating investment management roles in Australia.

He said other positives were that every MIT needed a trustee, legal and taxation advice, a custodian, fund accounting, unit pricing and valuation and so on.

“So there’s a really nice economic effect in that it’s creating a lot of work and revenue streams for a lot of service providers, as well as investment management,” Cannane added.

The Trust Company is one of the beneficiaries of these tax changes, and has grown from no MITs to 13 with $2 billion in assets.

“Based on our pipeline, I would expect at least another billion, if not more in the next year,” he said.

Continuing volatility across the world did not appear to be having an impact on foreign investment in Australia, said Cannane.

“It appears that a lot of these investors have the capital raised already, they choose or are required to have an allocation to Asia Pacific, including Australia, and so generally speaking you’re not seeing investors into Australia speculating,” he said.