There has been growing conjecture that the Australian Government is considering amending the wholesale client test for managed investment schemes, specifically the individual wealth tests – we know the impact this would have on our members.
Our submission to Treasury in September last year outlined our key concerns with any changes to the test:
- If a wholesale investor is not grandfathered they may be subject to a forced redemption
- If subject to a forced redemption, may encounter a forced capital gains tax event
- The Australian Financial Services License (AFSL) of funds may be breached, as wholesale funds are now servicing retail investors, and
- Investor equity and the ability to participate in future capital raisings so that their interests in a fund are not diluted.
It has been reported in the Australian Financial Review that the Government is considering raising the individual wealth test, potentially from $2.5m to $4.5m, as well as including a mechanism to allow the thresholds to rise to account for changes in prices.
Assistant Treasurer Stephen Jones has poured cold water on these claims, stating that Treasury has not yet made its recommendations to Government, and as such “no decision has been made” by Government.
In our submission to Treasury, the Property Council has said in the absence of any identified shortcomings in the test (and the impact it is having on consumers), a case has yet to be made to increase the threshold.
The Capital Markets Division will be closely monitoring the situation, including engaging the Government and ASIC, and working with our members at the appropriate time.