A critical Product Ruling decision by the Australian Taxation Office (ATO) has lifted a cloud of uncertainty hanging over Deferred Purchase Agreements (DPAs) – and provides clarity on the taxation treatment of the Instreet Masti DPA.
Deferred Purchase Agreements are a common and effective financial product used to issue structured products in the Australian market.
Boutique structured product manager Instreet Investment Limited Managing Director George Lucas says: “Product Ruling 2015/1 over the Instreet Masti DPA resolves an issue that has ‘shadowed’ the industry for many years. It puts DPAs on a level-footing with other commonly held investments in portfolios where the taxation treatment of them has been clear for some time.”
“This ruling not only confirms the tax effectiveness of the Instreet Masti DPA, but, more significantly, gives financial advisors and their clients who choose to invest in this product the certainty they are entitled to in regards to the tax treatment of this investment.”
Lucas says although this Product Ruling is important, it’s critical to remember that the Masti series has not been developed with a certain tax outcome top of mind.
“There has always been commercial motivations associated with an investment in Masti, and now with the addition of this ruling confirming the tax effectiveness I’m confident its place in investment portfolios will continue to grow.
“The Masti products have been developed as one investment option in a diversified portfolio that gives an investor the opportunity to access an equity market over a three-year timeframe with minimal upfront capital.
“The benefits include competitive financing, the capacity to walk away from the investment without penalties, a fixed coupon in years one and two, uncapped returns and limited currency exposure.
“There are risks, of course, with the most obvious being the reference equity index must increase over the three years for the investor to get a positive return.
“There are also other risks, but these risks are well documented in the PDS, and advisors only suggest their clients use the Instreet Masti DPA as one element of a well-diversified portfolio. They can, however, now reassure them about the tax situation in the wake of the ATO Product Ruling.”
Instreet is an independent investment house that works closely with the financial adviser community to conceive and distribute retail investment products. After identifying adviser needs and market trends, Instreet builds customised investments sourcing quality wholesale providers. By doing so, Instreet makes institutional assets available to individual investors. The end result is a range of investment solutions designed to better achieve the goals of clients and advisers.
For more information: www.instreet.com.au
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