Introduction to Legal Entity Fund Structure

This module covers the structure and hierarchy of legal entity platforms of Australia such as super, investor-directed portfolio service, separately managed accounts, etc., which are at the portfolio level.

Click here to understand the terms and abbreviations used in this module.

Tax File Number (TFN) Status at Legal Entity

The Legal Entity application is enhanced to capture the TFN Status and TFN Status Effective Date. The TFN Status Effective Date is also added at the portfolio level and will be used along with TFN Status to determine the applicability of withholding taxes for residents.

This functionality allows the maintenance of the legal entity structure of funds in Australia, which includes superannuation funds, separately managed accounts, etc.

There can be certain hierarchies where an SMA can have a parent legal entity, which can be an IDPS or a Super. The Super platform can have various subtypes such as Accumulator, TTR (Transfer to Retirement), or Pension.

The tax residence of the portfolio will be updated based on certain factors such as the fund residence in case of IDPS or IMA. In the case of SMA, any changes to the parent portfolio’s tax residence will also trigger a change to the tax residence of all linked child portfolios. Changes to the tax residence of the legal entity (fund residence) will trigger changes to the residence of all the linked super or SMSF portfolios.

The GST in Australia has a Reduced Input Tax Credit (RITC) component and the RITC percentages can vary based on the fund type. For instance, a Super can have a RITC of 65, while an IDPS can have a RITC of 68. The application allows maintaining the RITC rates and there is an archival mechanism where older rates are moved to the history application. Though GST, RITC is a separate development, this functionality allows configuring the RITC percentages per fund platform.

The Legal Entity application is enhanced to capture the TFN status at the legal entity level. The TFN status set at the legal entity level automatically defaults at the portfolio level. In case the TFN status of a legal entity is modified, the change is reflected across all the linked portfolios.

The changes allow maintaining TFN Status at the legal entity level in addition to the portfolio level, which is important for operational reasons. The TFN status is more accurately tracked along with the TFN status effective date, to determine the applicability of the withholding taxes at the platform or payer level.