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News & Press: Opinion

Growth at Last for The Hedge Fund Industry?

15 August 2013   (0 Comments)
Posted by: Author: Dale Lippstreu
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Author: Dale Lippstreu (MoneywebTax)

Overall, proposed changes are positive.

National Treasury has produced some sensible yet transformative proposals for the tax treatment and regulation of hedge funds. Changes to the Income Tax Act contained in the Taxation Laws Amendment Bill of 2013, as well as forthcoming changes to the Collective Investment Schemes Control Act (CISCA) will open up attractive new options for private investors.

Hedge funds have to date been unregulated, with the result that they could not be promoted or offered to the man in the street. Beyond this, hedge funds carried tax risks in that investment gains could be taxed as ordinary income either in the fund or the hands of the investor depending on the fund structure. This placed hedge funds in a highly unfavourable position relative to traditional collective investment schemes (CIS) where no tax could arise in the fund or the investor irrespective of the level of trading activity undertaken. Furthermore, all gains realised on withdrawal from a CIS fund would be treated as capital gains unless the investor engaged in active jobbing in and out of funds.

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