The Trust Company (Sydney Airport) Limited (the Responsible Entity) as Responsible Entity of Sydney Airport Trust 1 (SAT1) made a choice to elect into the Attribution Managed Investment Trust (AMIT) regime in respect of the year ended 31 December 2020.
The choice to elect into the AMIT regime is irrevocable. As such, SAT1 will be an AMIT for the 31 December 2020 income year and all subsequent income years provided that the requirements to be an AMIT are satisfied.
The ASX Announcement dated 13 December 2017 sets out the intention for the Responsible Entity to elect into the AMIT regime and the relevant changes made to the SAT1 Constitution to enable SAT1 to make the choice to elect into the AMIT regime.
Further details in relation to the AMIT regime have been set out below.
What is an attribution managed investment trust (AMIT)?
An AMIT is a managed investment trust (MIT) that has chosen to apply the AMIT regime. SAT1 currently qualifies as a MIT. It is the intention of the Responsible Entity that SAT1 continues to qualify as a MIT in future years also.
What is the AMIT regime?
The aim of the AMIT Regime is to provide greater certainty to the taxation treatment of MITs and their members and greater flexibility in the operation of an AMIT’s tax affairs.
There are a number of advantages of electing into the AMIT regime and therefore the Responsible Entity has made the choice for SAT1 to elect into the AMIT regime on the basis that the AMIT regime:
- provides the ability for MITs to “flow-through” taxable income to their unitholders on an “attribution basis”. As such, unitholders do not need to be made presently entitled to the distributable income of SAT1 each 31 December;
- provides certainty that SAT1 should be treated as a “fixed trust” for tax purposes;
- reduces compliance costs as it will allow SAT1 to reconcile prior years variances (referred to as ‘unders and overs’) without the need to issue new distribution statements to unitholders. This also means that SYD Securityholders are not required to amend prior year tax returns; and
- allows for upward cost base adjustment of units held by SYD Securityholders where the amount distributed is less than the taxable income attributed for an income year.
Will the AMIT regime change the way in which SAT1’s income is taxed?
No. The AMIT regime will not change the way SAT1’s income is taxed. Consistent with the previous trust tax regime:
- SAT1 will continue to be a “flow-through” trust and will not itself be subject to income tax;
- Australian tax resident unitholders will include their share of SAT1’s taxable income in their assessable income for the year to which the income relates; and
- Based on SAT1’s income profile, foreign tax resident unitholders will be subject to withholding tax in respect of the taxable income attributed (subject to any withholding tax exemptions).
Will the AMIT regime change the way in which I fill out my tax return?
No. There is no change in how you will fill out your tax return as a result of SAT1 becoming an AMIT.
SYD will continue to issue you with an annual SYD Tax Statement each year within 3 months after year end. The SYD Tax Statement will also act as your AMIT Members Statement (AMMA) in respect of your security holding in SAT1 and will set out the components of your share of SAT1’s taxable income. The SYD Tax Statement has been altered to accommodate this change and comply with the requirement under the AMIT regime to issue SYD Securityholders an AMMA statement.
The SYD Tax Statement should be read together with the SYD Tax Statement Guide, which will be issued each year in time for lodgement of your income tax return.
How does this impact SYD Securityholders?
The impact to SYD Securityholders of SAT1 electing into the AMIT regime is as follows:
- There should be no adverse change to your personal tax as a result of SAT1 becoming an AMIT
- The taxable income of SAT1 must be attributed to Securityholders on a fair and reasonable basis. However, there should be no change in the way the tax components are attributed to SYD Securityholders as SAT1 will continue to attribute the taxable components of a distribution to its Securityholders in the same proportion to their ownership interests held by each SYD Securityholder for the relevant year.
- SYD Securityholders will now be able to increase the cost base of their units in SAT1 where the taxable amount attributed exceeds the cash distributions paid to SYD Securityholders for an income year. Under the previous trust taxation regime, an increase to cost base was not possible, but Securityholders were only required to reduce the cost base of their units in SAT1 for capital gains tax purposes for any tax deferred components of their distribution (i.e. where the cash distribution exceeded the taxable components and any CGT concession). This is also the case under the AMIT Regime. The annual SYD Tax Statement will set out the AMIT cost base adjustments required to be made to the tax cost base of the units held in SAT1 by Securityholders.
What is the impact of SAT1 being an AMIT in respect of the year ended 31 December 2020?
During the year ended 31 December 2020 SAT1 derived $116.4 million of cross staple loan interest from SAL. Due to the impact of COVID-19, the Responsible Entity did not make a cash distribution to Securityholders in respect of the year ended 31 December 2020 in order to preserve Sydney Airport's liquidity in the COVID-19 economic climate.
Under the AMIT regime, the taxable income of SAT1 will be attributed to SYD Securityholders at the time the AMMA Statement is issued. However, as SAT1 is an AMIT, SYD Securityholders will be able to increase the tax cost base of their SAT1 units where the taxable income attributed from SAT1 exceeds the cash distribution (as is the present case). The increase to the tax cost base eliminates the possibility of double taxation which can occur where SAT1 has attributed taxable income to a SYD Securityholder but not distributed those amounts in cash and the SYD Securityholder subsequently disposes of their SYD securities.
Refer pages 77 and 120 of the 2020 SYD Annual Report for further detail.
Where can I get more information on the AMIT regime?
If you have any further tax questions in relation to the AMIT regime and how that might affect your investment in SAT1, we recommend you consult your tax adviser or refer to the information from the ATO website here.