Asian Region Funds Passport move welcomed: Equity Trustees

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The news that the Asian Funds Passport will come into effect at the end of next year, and allow Australian funds managers to offer investment funds directly to Japanese and Korean investors, is to be welcomed and is a significant first step to help Australian funds compete internationally, says Harvey Kalman, Executive General Manager Corporate Trustee Services with Equity Trustees. 

“We welcome the proposed changes which are without question positive, but there remain issues hindering the competitive distribution of local trusts globally that still need to be addressed,” Mr Kalman said.

“This bolsters moves for Australia to be recognised as a centre for investment product development and management.

“Such recognition will increase the strength of our financial sector and its ability to compete, benefiting local investors and the economy overall.

“The changes mean managed funds are now exempt from the out-dated taxation provisions that apply to trusts.  New rules now apply for the tax treatment of the trust and unit holders in that trust, which is a positive move for fund managers and investors.

“But there is still work to be done to ensure that Australia is internationally competitive,” Mr Kalman said.

The positive changes of the new tax system for Collective Investment Vehicles (CIVs) are expected to include:

* A new attribution model for determining unit holder tax liabilities, which allows amounts to retain their tax character as they flow through a Managed Investment Trust (MIT) to the final unit holder

* the ability to carry forward understatements and overstatements of taxable income, instead of re-issuing investor statements

* deemed fixed trust treatment under the income tax law

* upwards cost base adjustments to address double taxation

* legislative certainty about the treatment of tax deferred distributions and

* the key change, which is the ability to create multi-currency classes within a fund.

 Mr Kalman said: “While this is good news, more needs to be done to ensure that Australia is internationally competitive. In particular, there are a number of issues which need to be addressed in future legislation.

“Firstly, a key element missing is the ability to elect that the gains and losses associated with foreign exchange positions be moved on to capital accounts rather than being recorded on income account.

“The alignment of foreign exchange gains or losses to the underlying portfolio treatment is critical to enable currency overlay funds or classes to be created in an effective way.  This is particularly important given global investors will be reluctant to invest in Australian funds nominated only in A$.

“There is no doubt we also need different currency classes for those investors who want to hedge their exposure and invest in $US rather than $A.  Until this is possible, global investors will be reluctant to invest in Australian funds denominated only in A$. 

“Another requirement is that we move away from unitised trusts to unitised companies as our CIVs.  This is the critical “Me 2” aspect required, with the FX issues, to allow us to export our funds.

“The third condition is that the regulatory capital requirement of trustees or responsible entities should be capped at US$20 million.  Other APEC countries have a cap of US$20 million while European trustees are capped at just €10 million.

At the moment, there is no cap in place in Australia.

 “The final missing link is probably the most important – we need to ensure fiduciary interest is at the forefront of the system.  This means all new AMITs and CIVs should have an independent trustee or responsible entity, rather than being able to choose between an internal or external one.

“If we wish to export our products and skill overseas, we need to be confident that the model we are promoting is as trustworthy and dependable as possible,” Mr Kalman said.

He added that, despite some missed opportunities, if implemented the new rules go a long way to enhancing the international competitiveness of Australian managed funds and promote the greater export of Australia’s funds management expertise. 

“It is a good start in the right direction.

“I am confident the Government will continue to move in this right direction for the industry, and implement further legislative change to ensure that Australian’s managed investment trusts can compete internationally,” Mr Kalman said.



Equity Trustees was established in 1888 for the purpose of providing independent and impartial Trustee and Executor services to help families throughout Australia protect their wealth. As one of Australia’s largest and oldest listed independent trustees, we offer a diverse range of services to individuals, families and corporate clients including aged care advice, asset management, estate planning, philanthropic services and Responsible Entity (RE) services for external Fund Managers.

Equity Trustees Limited is a subsidiary of EQT Holdings Limited. EQT Holdings Limited is a publicly listed company on the Australian Securities Exchange (ASX: EQT) with offices in Melbourne, Kew, Sydney, Brisbane and Perth.


For media inquiries please contact:

Harvey Kalman
Executive General Manager, Corporate Trustee Services
03 8623 5301/+613403066749

Alicia Patterson
Senior Manager – Marketing & Communications
03 8623 5396 / 0403 172 024