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The Property Council recommends the following amendments to Division 6C for the purpose of clarifying its operation. The aim of The Property Council’s suggested amendments to Division 6C are to provide the property sector with certainty in relation to the following aspects of how the Division is intended to operate. The current uncertainty of interpretation of the provisions creates risk
in a sector worth $XXX billion in market capitalisation, and is untenable.
There should be certainty regarding the scope of the types of activities which are included within “eligible investment business” in Division 6C particularly to ensure that appurtenances and chattels associated with the land are included within the definition.
There should be certainty regarding the scope of the meaning of “rent” so that modern day income arising from the operation of multi-million dollar shopping centres and commercial buildings is clearly treated as being from “eligible investment business”.
The scope of financial activities which are allowed to fall within paragraph (b) of the definition of “eligible investment business” should be sufficiently general and parallel with the definition of “financial arrangements” within proposed Division 230. There seems little need to have an additional and narrow scheme of such activities for the purposes of Division 6C.
The control test in Section 102N should be abolished, having regard to the fact that controlled subsidiaries of a Division 6 trust will be taxed accordingly, and their ownership by a “public unit trust” does not change this outcome. In fact, trusts which are not public unit trusts are not subject to this rule, and the existence of the rule constitutes discrimination against widely held trusts, as compared to non-widely held trusts.
Further, ownership of “controlled entities” if those entities are subject to the CFC, FIF or Foreign Hybrid rules in Division 830, should not cause a public unit trust to fail Division 6C, and the Division should be given a territorial or ‘waters edge” limitation.
The definition of Public Unit Trust in Section 102P should be amended so that the mere ownership of a 20% interest in such a trust by a superannuation fund (refer S 102P(2)(b), does not cause such a fund to be a Public Unit Trust.