Entity Setup
Entity Setup Considerations: Starting a Managed Investment Trust (MIT) in Australia
Recent clarifications around MIT rules and tax concessions mean setting up a Managed Investment Trust requires care—especially for foreign investors seeking concessional withholding rates.
By NomadicTax Research Team • 6 min read • November 16, 2025
## What’s New with MIT Rules
- After a **taxpayer alert (TA 2025/1)**, the ATO highlighted that some **“captive” Managed Investment Trusts**—those ultimately owned by a single foreign investor—may face scrutiny under **Part IVA** general anti-avoidance rules and could lose concessional withholding tax rates if they restructure to appear to meet nexus or pooled investment requirements. ([dlapiper.com](https://www.dlapiper.com/en-AU/insights/publications/2025/03/australian-federal-budget-2025?utm_source=openai))
- The Government has committed to **amending laws** to ensure **genuinely foreign based widely held investors**—like pension funds—can still access the **15% MIT withholding tax rate** on fund distributions. These amendments will apply to fund payments from **13 March 2025**. ([dlapiper.com](https://www.dlapiper.com/en-AU/insights/publications/2025/03/australian-federal-budget-2025?utm_source=openai))
## Key Setup & Structuring Implications
When considering setting up or investing in a MIT, especially for foreign investors or funds, careful structure matters:
- Ensure **multiple genuine investors**: avoid designs where one investor controls a fund but others are nominal.
- Meet **pooled investment requirements** under Corporations Act 2001 genuinely—not superficially. Document investment source, ownership structure, investor relationships. ([dlapiper.com](https://www.dlapiper.com/en-AU/insights/publications/2025/03/australian-federal-budget-2025?utm_source=openai))
- Understand **material change events**: If there is a new investor, ownership change, or restructuring, the ATO could apply anti-avoidance rules. So plan for change events from the outset.
## Tax Treatment: Withholding & Rates
- Concessional MIT withholding rate under 15% is preserved for qualifying MITs owned by widely held foreign investors. ([dlapiper.com](https://www.dlapiper.com/en-AU/insights/publications/2025/03/australian-federal-budget-2025?utm_source=openai))
- Non-qualifying MITs might have withholding rates at the non-concessional rate, which could be higher.
- Foreign residents involved in CGT (capital gains tax) implications: proposed foreign-resident CGT measures may affect MIT distributions if assets have close economic connection to Australian land. ([dlapiper.com](https://www.dlapiper.com/en-AU/insights/publications/2025/03/australian-federal-budget-2025?utm_source=openai))
## Example: Structuring for Foreign Pension Fund Investor
Let’s say a foreign pension fund wishes to invest in Australian infrastructure assets via a MIT. To benefit from 15% withholding rate:
- Use structure with **multiple unrelated investors**, not a single majority controller.
- Hold assets that are genuinely under the fund trust, avoiding disguised settlor-arranged ownership via trusts.
- Keep clear record, structure documentation, and consult legal re Part IVA risks. Any later change in the investor pool must maintain the widely held status.
## Steps Before Setting Up a MIT
1. Consult legal and tax counsel to design ownership structure.
2. Check ATO’s public guidance & rulings (including recent alert TA 2025/1). ([dlapiper.com](https://www.dlapiper.com/en-AU/insights/publications/2025/03/australian-federal-budget-2025?utm_source=openai))
3. Prepare trust deeds, investor agreements that reflect pooled investments.
4. Document compliance with Corporations Act requirements.
5. Monitor any foreign CGT proposals if disposing of Australian connected assets.
## Final Thoughts
MITs remain powerful tools for foreign and institutional investors—but the window for planning is narrower. Proper setup, documentation, and respecting ownership rules will be key to maintaining concessional tax treatment.