Is there a U.S. and/or U.K. counterpart of Australia's AMIT(Attribution Managed Investment Trust) Regime?

Question

The AMIT(Attribution Managed Investment Trust) Regime:

The AMIT Regime is a new set of rules for the taxation of managed investment trusts and their members. One of the aims of the AMIT Regime is to provide greater certainty than the current rules in relation to the taxation position for managed investment trusts and their members.

One key aspect under the AMIT Regime is that the Responsible Entity must allocate or “attribute” the taxable income of the Trust to members on a fair and reasonable basis. Currently, members are subject to tax on their proportionate share of the taxable income of the Trust based on the share of the income of the Trust according to trust law principles that they are presently entitled to.

The AMIT Regime may provide the following potential benefits for members of an AMIT:

• Greater clarity and certainty associated with the tax treatment of distributions and the character of income and capital of the AMIT, in contrast to the current “present entitlement” regime. In particular, a removal of the potential for double taxation that may arise for members where there are mismatches between the amount distributed and the taxable income of the AMIT;

• If a variance is discovered between the amounts actually attributed to members for an income year, and the amounts that should have been attributed, the variance can be attributed in the income year in which it is discovered by the responsible entity, rather than amending previous years' tax returns and notifying members of those amendments.

• An AMIT will be deemed to be a “fixed trust” and members will be treated as having vested and indefeasible interests in the income and capital of the AMIT throughout the income year, which can be relevant for:

• utilising trust losses; and

• applying the franking credit provisions.

• Where a member receives a distribution of cash that is less than their allocated share of the taxable trust components, members will be entitled to make upward adjustments to the cost base of their units in the AMIT.

(Source: SCENTRE GROUP)

Is there a U.S. and/or U.K. counterpart of Australia's AMIT(Attribution Managed Investment Trust) Regime described above? Or is Australia the only country to have implemented this new taxation scheme?

Answer 1

This answer is limited to the United States.

There are several counterparts to this in U.S. law.

The AMIT regime is essentially the law that applies to partnerships (especially limited partnership) under Subchapter K of the U.S. tax code and to owners of S corporations. It is also similar to the tax rules that applies to regulated investment companies (RICs), real estate investment trusts (REITs), and publicly held partnerships. When all income must be distributed currently under a trust to the present beneficiaries, a trust is a "simple trust" under U.S. law and taxed in a similar manner.

The allocation between income and principle on a means other than non-tax trust law allocations resembles that of "unitrusts" in which the current income beneficiary gets a certain percentage of the fair market value of the trust each year and the balance goes to a remainder beneficiary, rather than allocating the tax attributes of a trust between income and principle according to trust law principles.

(In contrast, C-corporations and "complex trusts" under U.S. tax law, are taxed very differently than under the AMIT regime for certain trusts in Australia.)

On the other hand, the U.S. law lacks "franking credits" in its corporate tax law system in almost all cases. Also, under U.S. law, there is not a "potential for double taxation that may arise for members where there are mismatches between the amount distributed and the taxable income of the AMIT[.]"

One feature which is novel compared to U.S. law is that:

If a variance is discovered between the amounts actually attributed to members for an income year, and the amounts that should have been attributed, the variance can be attributed in the income year in which it is discovered by the responsible entity, rather than amending previous years' tax returns and notifying members of those amendments.

This is only very rarely allowed under U.S. tax law, and the doctrines involved when it is allowed justify this kind of treatment differently in terms of tax law theory.