Loss of MIT status ‘beyond control’—FHT

The group’s Australian subsidiary lost its MIT status due to a share swap transaction.

Frasers Hospitality Trust (FHT) said its loss of its Managed Investment Trust (MIT) status for its Australian subsidiary, FHT Australia Trust (FHTAT), resulting in increased tax withholding rates for foreign investors was ‘beyond the control of FH-REIT and the REIT Manager’.

This was part of the response to questions from the Securities Investors Association (SIAS), after FHT announced that FHTAT lost its MIT status on 9 October.

For FH-REIT to qualify as a withholding MIT, no foreign (non-Australian) resident can hold a stake of 10% or more in FH-REIT at any point during the income year.

However, on 20 September, a share swap transaction between InterBev Investment Limited (IBIL), a subsidiary of Thai Beverage Public Company Limited (ThaiBev), and TCC Assets Limited (TCCA) transpired, increasing the level of foreign ownership in FHT, thus triggering a loss of MIT status. According to FHT, this reclassification from MIT to a standard investment trust for the financial year ending 30 September 2024 means foreign investors may face higher tax withholding on distributions from the Australian subsidiary.

FHT’s management explained that it became aware of the ownership shift following ThaiBev’s initial announcement on 18 July 2024, which confirmed the pending share swap. However, they clarified that the impact on MIT status could not be determined until the swap’s completion and the resulting ownership calculations were finalised. On 9 October 2024, the trust provided an update to Stapled Securityholders, outlining the anticipated financial impact due to the tax reclassification.

In response to concerns raised by unit holders, FHT stated that the management team and parent company, Frasers Property Limited (FPL), also hold interests in the trust and are similarly affected by the tax changes. As a result, the REIT Manager has ruled out waiving or reducing management fees to offset the tax burden for investors, asserting that the MIT status loss was beyond their control.

With the change in ownership now in effect, FHT’s board will continue to conduct regular strategic reviews to align with long-term objectives. No specific changes were confirmed, but FHT emphasised that the Managers are committed to acting in the best interests of all investors amidst the evolving ownership landscape.