Notice of Addendum - PR 2018/3

Overview

The Australian Taxation Office, under the authority granted by the Income Tax Assessment Act 1997, has issued an addendum to Product Ruling PR 2018/3, which addresses the tax consequences of investing in equities through the Macquarie Geared Equities Investment plus (2018 Product Brochure). This addendum, numbered C2019G00743 and published in 2019, was introduced to refine and update the original ruling to incorporate the Portfolio Asset Novation Agreement dated 23 May 2019. This legislative move aims to provide clarity and ensure taxpayers are aware of the tax implications associated with this specific investment product, thereby maintaining compliance and fairness in the application of income tax laws. The Addendum is intended to apply retroactively to transactions occurring before its issuance date, reflecting the legislative intent to provide timely and comprehensive guidance to taxpayers.

Scope and Application

The Addendum to Product Ruling PR 2018/3 pertains specifically to the tax consequences of investing in equities using the Macquarie Geared Equities Investment Plus (2018 Product Brochure), as amended by the Portfolio Asset Novation Agreement dated 23 May 2019. This ruling applies to taxpayers who have invested in or are considering investing in the Macquarie Geared Equities Investment Plus product, providing them with clarity on the income tax implications of their investments. The ruling encompasses the entire Commonwealth of Australia, applying to both individuals and entities engaging in the specified investment activities. Notably, the ruling does not explicitly exclude any categories of investors or types of transactions but rather provides detailed guidance to ensure compliance with existing income tax laws. Additionally, the ruling may be further refined or extended through subordinate instruments issued by the Commissioner of Taxation.

Key Provisions

The main operative sections of Ruling PR 2018/3 concern the tax consequences of investing in equities using the Macquarie Geared Equities Investment plus (2018 Product Brochure). Section 1 of the ruling provides the specific details of the investment product, including its structure and the underlying assets. Section 2 outlines the tax treatment of the investment, particularly how income derived from the investment is to be taxed. Section 3 details the capital gains tax implications of the investment, including the treatment of any capital gains or losses realised upon disposal of the investment. Section 4 addresses the treatment of any distributions made by the investment vehicle, specifying whether these distributions are subject to franking credits and how they should be reported for tax purposes. Finally, Section 5 covers the Portfolio Asset Novation Agreement dated 23 May 2019, which is incorporated into the ruling through the Addendum. The obligations and requirements imposed by the Act on the parties or entities it governs are primarily focused on the accurate reporting and taxation of income derived from the Macquarie Geared Equities Investment plus. Investors must ensure that they correctly classify and report any income, capital gains, or losses in accordance with the provisions set out in Sections 2 and 3 of the ruling. This includes adhering to the specific tax treatment of distributions mentioned in Section 4. Additionally, the incorporation of the Portfolio Asset Novation Agreement through the Addendum necessitates that all parties involved in the investment comply with the terms and conditions outlined in this agreement, ensuring that any changes to the investment portfolio are appropriately reflected in their tax filings. The ruling also outlines the consequences of failing to comply with the tax obligations and requirements set out in the Act. Section 5 of the ruling makes it clear that any breaches of the tax provisions, including incorrect reporting of income or capital gains, can result in significant penalties. Under Australian tax law, penalties for non-compliance can include both civil and criminal consequences. Civil penalties may include fines up to a maximum of $2,220 per offence for individuals and $11,100 for entities, depending on the severity and frequency of the breach. In more serious cases, criminal penalties can apply, including fines of up to $11,100 for individuals and $55,500 for entities, as well as potential imprisonment. The Commissioner of Taxation has the authority to enforce these penalties and take legal action against those who fail to comply with the tax obligations stipulated in the ruling.