A managed investment trust (MIT) is a type of trust in which members of the public jointly invest in some passive income activities, such as shares, property or fixed interest assets. If a trust meets certain requirements for the income year it is in operation, it can be a managed investment trust(MIT). A managed investment trust is the opposite of a “guaranteed trust”. It is a trust established for the management and use of property, which includes narrow defined property management trusts for the purpose of simple property management and disposal trusts established for the purpose of using and disposing of property. The scope of managed investment trust application is extremely wide, which can be used not only for the management of the property of minors and injunctive persons and the management and distribution of estates, but also for trust investment.
More Information about MIT
The Managed Investment Trust (MIT) was first available in Australia in 2008. Primarily designed to reduce withholding tax on distributions to foreign investors, it also provides increased certainty as to the tax treatment of an Australian trust for foreign investors. Whilst the original MIT concept was to encourage foreign investment into existing trusts, foreign investors have regularly established it subsequently to be their investment vehicles to acquire assets, directly or indirectly.
Today, the main benefit of establishing an MIT is to access to a favorable withholding tax regime, under which foreign investors can receive a reduced withholding tax rate from MIT funds.
What Does A Managed Investment Trust Include
Managed Investment trusts include following types, respectively are:
1)cash management trusts
2)money market trusts
3)mortgage trusts
4)unit trusts
5)managed funds, such as a property trust, share trust, equity trust, growth trust, imputation trust or balanced trust.
The Requirements A Managed Investment Trust Must Meet
We mentioned slightly about the defination of a MIT, and not a trust must meet some standards so it can be qualified as a MIT. Now, let’s see more about it.
First, the residency. Both the trustee, the central management and control of the trust must be located in Australia. And they will even need to pass the residency test, so the relationship will be officially defined.
Second, the trust must be in active trade and business engaged.
Third, the trust must be a managed investment scheme as defined in the Corporations Act.
Four, the trust must be widely held with no less than 25 actual or deemed members in it. To satisfy the closely-held exclusion, the fund must not have fulfil neither one of those two conditions, which are 10 or fewer investors owning 75% or more of the assets and 1 foreign individual owning 10% or more of the assets.
Last but not least, the trust must have license and pass the licensing test.
The Strength of MIT
Managed investment trust mainly beholds the characteristics of “the separation of responsibilities and interests”. In many cases, the establishment of a trust is based on management considerations. For example, if someone has $300,000 and his child is studying abroad, it is impossible for parents to manage their child’s daily life and expenses overseas, but they are not at ease with the child’s self-management of money. Under this circumstance, it is believed that it is entirely possible to set up a management trust and agree that the trustee manages the trust property for his children.
This will not only ensure the smooth progress of the child’s life and schooling, but will not cause the child to waste property because he cannot manage property or suddenly has so much money at his disposal. Among high school graduates, there is a huge upsurge of studying abroad. The author believes that proper use of management trusts can not only relieve parents of many worries, but also objectively benefit the growth of children.
