Master Limited Partnerships (MLPs) in Australia: 2025 Investor Guide

With term deposits at record lows and the hunt for yield intensifying, many Australians are looking beyond our borders for income-generating investments. Enter the Master Limited Partnership (MLP)—a structure long popular with US investors, now grabbing the attention of income-focused Aussies in 2025. But what exactly are MLPs, and do they deserve a place in your portfolio?

What is a Master Limited Partnership (MLP)?

MLPs are unique investment vehicles, primarily listed on US exchanges, that combine the tax benefits of a partnership with the liquidity of publicly traded shares. They’re most common in the energy sector—think oil and gas pipelines, storage facilities, and infrastructure—but are expanding into renewables and other assets.

• Structure: MLPs are publicly traded, but operate as partnerships. Investors (“unitholders”) receive distributions from cash flow, not dividends.
• Tax: In the US, MLPs avoid corporate income tax, passing profits directly to investors, who then pay personal income tax. Australians, however, face a different tax treatment—more on that below.
• Yield: MLPs are known for high yields, often 5–8% in 2025, appealing to retirees and income investors.

For example, Enterprise Products Partners (NYSE: EPD) is a US MLP with a 2025 distribution yield of around 7.2%, paid quarterly. While the bulk of these partnerships are still US-based, some ETFs now provide Aussies with diversified MLP exposure.

MLPs and the 2025 Tax Landscape for Australians

Tax treatment is the biggest curveball for local investors. While US-based unitholders enjoy “pass-through” taxation, Australian investors face a patchwork of rules:

• Withholding Tax: US-sourced MLP distributions to foreign investors (including Australians) are typically subject to 37% withholding tax in 2025, up from 35% after recent US budget changes.
• No Franking Credits: Unlike Aussie shares, MLP income does not come with franking credits, so double taxation can occur.
• Tax Reporting: MLPs can create complex tax paperwork. Investors may receive a K-1 form (not the standard 1099), and must declare income to both US and Australian tax authorities.

To sidestep this complexity, many Australian investors use ASX-listed ETFs or managed funds that wrap MLPs, handling US tax obligations internally and issuing more straightforward Australian tax statements. The Betashares Global Energy Companies ETF (FUEL) is one such option, offering indirect MLP exposure without the headache of foreign paperwork.

The Pros and Cons of MLPs in 2025

Before jumping on the MLP bandwagon, it’s crucial to weigh up the rewards and risks:

Why MLPs Appeal in 2025

• High Yields: With RBA rates expected to remain below 4% in 2025, MLPs’ 5–8% yields are tempting for income-hunters.
• Inflation Hedging: Many MLPs operate essential infrastructure, with revenue streams often indexed to inflation or energy prices.
• Portfolio Diversification: MLPs don’t move in lockstep with Aussie equities or bonds, offering genuine diversification.

Potential Pitfalls

• Tax Complexity: Direct investment means navigating US and Australian tax systems—potentially costly for individuals.
• Sector Concentration: Most MLPs remain in oil and gas. While renewables are growing, energy transition risks remain.
• Interest Rate Sensitivity: MLPs borrow heavily to fund infrastructure, so rising global rates can squeeze margins and pressure unit prices.
• Currency Risk: As US-dollar assets, MLP returns are sensitive to AUD/USD swings—potentially amplifying gains or losses.

2025 has also seen some new regulations: The US Securities and Exchange Commission now requires enhanced ESG disclosures for MLPs, with some Australian fund managers screening out those failing climate transition benchmarks.

How to Add MLPs to Your Australian Portfolio

For most Australians, there are three main ways to gain MLP exposure:

1. Direct Purchase: Buy US-listed MLP units via an international brokerage. Be prepared for tax complexity and paperwork.
2. ASX-listed ETFs/Managed Funds: These funds pool MLPs, handle tax, and offer simple reporting. Examples include FUEL or the Global X US Energy Infrastructure ETF.
3. Global Infrastructure Funds: Some Australian funds include MLPs as part of a broader infrastructure strategy, reducing sector and single-country risk.

As always, diversification and careful research are key. Check product disclosure statements for MLP weighting, fees, and risk factors before investing.

Conclusion: Are MLPs Worth a Look in 2025?

Master Limited Partnerships are not for everyone, but for those seeking high, inflation-linked income and willing to navigate some complexity, they can be a compelling addition to a diversified portfolio. In 2025, with global energy markets evolving and infrastructure spending surging, MLPs offer Australians a way to tap into international yield—just be sure you understand the tax and sector risks before jumping in.