Treasury has released exposure draft legislation to amend the income tax law to provide “look‑through” treatment for instalment warrants and instalment receipts.

If the law is changed, the investor of the instalment warrant or receipt (including a SMSF) is treated as the owner of the asset of the instalment warrant or receipt trust (with some exceptions), instead of the trustee. This means that the trust is ignored and anything that happens to or results from being the owner of the asset, such as receiving dividends and franking credits, affects the investor and not the trustee.

Superannuation funds are eligible for look-through treatment for any limited recourse borrowing arrangement that satisfies the requirements of the SIS Act.

The change will clarify that the SMSF trustee should be treated as the owner of the asset of the holding trust, instead of the trustee of the holding trust.