The Assistant Treasurer, Chris Bowen MP has announced that the Government has commenced consultation on draft legislation to reform Division 6C of the Income Tax Assessment Act 1936.

Key changes include:

• clarifying the scope and meaning of investment in land for the purpose of deriving rent;
• introducing a 25 per cent safe harbour allowance for non-rental, non trading income from investments in land;
• expanding the range of financial instruments that a managed fund may invest in or trade; and
• following consultation with industry, providing a further 2 per cent safe harbour allowance at the whole of trust level for non-trading income.

These modifications will make it easier for a trust to comply with the eligible investment business rules.

The Government expects the legislation to be ready for introduction in the Spring 2008 sittings (beginning 26 August).