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Australian Managed Investment Schemes

What you need to know about the Australian (MIS)

If you own units in Australian Manage Investment Schemes (MIS) when you go overseas, you can make the same deemed sale election as those who own Australian shares – see above.Once you have paid an CGT applicable, the units will not be subject to capital gains tax in Australia while you are overseas.The gains may be subject to CGT in the foreign jurisdiction where you are based while you are overseas.

If you go to the ATO web site and look up Australian Managed Investment Schemes, the main focus is on the withholding tax arrangements.Given that the earnings within an Australian MIS will likely include a mix of dividends, distributions and interest) the Australian government needed to determine an appropriate rate to charge withholding tax.The rule is that if the fund payments are made to a foreign resident residing in a country which has an effective exchange of information agreement with Australia, the final withholding tax rates is 15%.In all other cases, withholding is required at the rate of 30%.

A concessionary rate of 10% applies to fund payments by a clean building MIT – i.e. an MIT that holds only energy efficient commercial buildings constructed on or after 1 July 2012.

The countries with which Australia has an effective exchange of information agreement can be found at this link.

For more information on how the withholding tax rules work, go to the following ATO link.

The onus is on the trustees or custodians of MITs to withhold the correct amount of tax.If you are an investor in an MIT, it is your obligation to notify the MIT of your overseas address so that the MIT can deduct the correct amount of tax.

Investing in Australian MITs

While you are overseas you might find it difficult to find a financial planner who can recommend investments for you. However, if you find suitable investments yourself, as a foreign investor you should not have any problems investing.

Australia wants to attract investment funds from overseas and therefore most Australian based investment houses are set up to deal with foreign investors.