collective investment vehicle was recognised as a significant disincentive. For an Australian incorporated company, not being a “flow through” entity has meant the company is taxed at the corporate rate of up to 30 per cent. By contrast, trusts in Australia are commonly “flow through”, which means beneficiaries are taxed on the trust’s income .
The problem with trusts is that many investors in jurisdictions, including the US, don’t understand trusts and don’t like them.Now the recent legislation has kicked in, we have a new kid on the block that may be more attractive. A CCIV can act as an umbrella vehicle by offering multiple products , with each sub-fund constituted by a separate class of shares. The structure allows for cross-investment between funds – facilitating master feeder or hedging strategies.
In developing the Corporate Collective Investment Framework, Treasury cherry-picked the most appropriate aspects of these regimes to apply to the Australian context. Despite the clear advantages, there are teething problems with the new regime that will need to be worked through.