Stapled structures and foreign investor measures



On 20 September 2018, the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 was introduced into parliament to give effect to the government’s proposal to reform the tax treatment applicable to stapled structures and certain foreign investors.

This Bill reflects the culmination of a long process which began with the Australian Taxation Office seeking to address the use of staple structures with TA 2017/1 released in January 2017, and which may almost be resolved with legislative change.

This post excerpts the article 'Stapled structures and foreign investor measures', written by Stuart Landsberg, FTI, Christina Sahyoun and Angeline Young, (all PricewaterhouseCoopers), which originally appeared in the December / January issue of Taxation in Australia, The Tax Institute's member journal.

The Treasurer announced that the Bill will assist the government to “better guarantee the essential services and vital infrastructure that Australians rely on, by ensuring foreign investors pay their fair share of tax”. The Bill includes measures that seek to:
  • subject converted trading income to managed investment trust (MIT) withholding at the corporate tax rate; 
  • ensure that investments in agricultural land and residential property, including student accommodation (other than affordable housing), are subject to MIT withholding at the corporate tax rate; 
  • prevent double gearing through thin capitalisation changes; 
  • limit the foreign pension fund withholding tax exemption for interest and dividends to portfolio-like investments; and 
  • create a legislative framework for the sovereign immunity exemption.
These measures may significantly impact the commercial and financial outcomes for investors across a wide range of industry segments, including the infrastructure, real estate (including residential property and student accommodation) and agricultural sectors.

Importantly, the changes within this Bill are not limited to those who invest in stapled arrangements.


The Bill was referred to the Senate Economics Legislation Committee with a final report received on 9 November 2018. The authors supported the referral to the Senate Economics Legislation Committee as it was hoped there may be a recalibration of the legislation as the current drafting of the Bill may have unintended consequences, such as the distortion of the market in the agricultural sector, investment bias against the student accommodation sector and restriction in access of immunity for sovereign investors.

Unfortunately, the Senate Economics Legislation Committee did not recommend any changes to the Bill and it is likely that it will be passed as drafted (although the authors note the Labor Senators’ additional comments recommending caution in respect of the build-to-rent, student accommodation and agricultural sectors).

Accordingly, the near-certain, significant shift in tax policy represented by the Bill will impact a large number of stakeholders, including state and territory governments, a range of foreign institutional investors, Australian superannuation funds and Australian Securities Exchange listed entities including real estate investment trusts.

The Bill that was introduced into parliament on 20 September 2018 is largely the same as the exposure draft legislation released on 26 July and 7 August 2018. However, there have been some notable changes to the taxation of foreign investors in residential housing (in particular student accommodation), agricultural investments and also changes to the sovereign immunity and foreign superannuation fund exemption.

The article then goes on to look at the transitional measures for MIT residential housing income in more detail, as well as some issues with capital gains from membership interests, the foreign superannuation fund exemption, and changes to sovereign immunity.

The full article is available to read here.

For a further look into the new world of stapled structures, join us at the 2019 National Convention in Hobart.

James Beeston, (ATO), Kirsten Arblaster (PwC), and Kelly Heezen (AMP) take part in a special panel session looking at the significant reforms to the taxation of stapled structures in Australia, as well as the taxation of foreign inbound investors into Australia.

The outcome of these changes is to significantly limit the tax concessions previously available to many foreign investors, and the panel session will provide insights into the changes and an opportunity to ask questions of speakers of different backgrounds who will cover:
  • An overview of the key legislative changes (announced and enacted)
  • Practical issues that will arise in applying the changes
  • The extent to which stapled structures will be used going forward, and what structures are being seen in practice since the changes have been announced.
Find out more about the Stapled Structures panel session and the rest of the program on our website, and join us in Hobart, 13-15 March 2019, for the 34th National Convention.

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