The Australian government has announced plans to implement the third and final
element of an investment management regime (IMR), which, according to Minister
for Financial Services Bill Shorten, will provide certainty of tax treatment
for the funds management sector.
Under the reforms, income, gains or losses, which have an Australian source,
from portfolio interests or financial arrangements of a foreign managed fund,
will be excluded from the calculation of the fund's taxable income (and that
of its non-resident investors).
However, the exemption will not apply to the extent that withholding tax is
currently payable on the income, nor will it cover income or gains from an interest,
other than a portfolio interest in a publicly traded company, in taxable Australian
property.
The exemption will be restricted to foreign managed funds domiciled in countries
that are recognized by Australia as engaging in "effective exchange of information".
Shorten said that the changes will further enhance Australia as a financial
services centre in the Asia Pacific region.
"The IMR will provide certainty of tax treatment for the funds management
sector, which in Australia has AUD1.8 trillion (USD1.78 trillion) of funds under management (or
131% of Australia's GDP) - AUD61bn of which comes from offshore," he stated.
Shorten added that legislation for the first two stages of the IMR, announced
in December 2010 and January 2011 respectively, is currently being finalized
and is expected to be introduced into Parliament in the first half of 2012.
He also revealed that the government has decided to extend the previously announced
element 2, which exempts from Australian tax the conduit income of foreign funds
portfolio investments, to foreign non-portfolio investments of managed funds.
"The implementation of the IMR for managed funds ensures that Australia's
taxing arrangements with regards to passive portfolio investments are in line
with international norms and will make Australia a more attractive place to
do business for foreign funds", Shorten said.
LAWANDTAX-NEWS.COM
