The 2010-2011 Federal Budget has introduced some significant
changes that will have a positive impact on the funds management
industry. We welcome the announcements that have been made.
1 Government response to the Johnson Report
The Government has provided in-principle or direct report for
nearly all 19 recommendations in the Report of the Australian
Financial Centre Forum entitled Australia as a financial
centre: Building on our strengths. This Report was finalised
in November 2009 and released in January 2010. It is also known as
the 'Johnson' report, named after the Chairman of the
Forum, Mr. Mark Johnson. The intention of the Report is to position
Australia as a financial services centre, and the introduction of
an Investment Manager Regime (refer below) is one measure aimed at
achieving this objective.
Other recommendations made in the Report are:
A reduction in the Interest Withholding Tax (IWT) rate. This
will apply to borrowings of local subsidiaries from overseas
parents and will be reduced from 10% to 7.5% in 2013-14 and to 5%
in 2014-15. The IWT rate for borrowings by any bank branch from its
overseas head office will be reduced from 5% to 2.5% in 2013-14 and
to zero in 2014-15. The Government has announced its support for
this recommendation, which was also made in the Henry Tax
The development of a Asia Region Funds Passport
The establishment of an online regulatory gateway
The Government has also asked Mr Johnson to chair a task force
of senior financial sector representatives. Broadly, the role of
the task force will be:
engagement and enhancement of Australia's presence in
Engagement with domestic industry on an informal basis;
Facilitation of industry input into the design of a number of
proposals, including those mentioned above.
Another announcement made by the Government was the
establishment of a Centre for International Finance and Regulation
in Australia. While this was not identified in the Johnson Report,
one of the key themes underlying the work of the Centre will be to
foster financial services innovation and simultaneously ensuring
that the inherent risk in the financial system is appropriately
2 Investment Manager Regime (IMR)
The Government will commence consultation on an IMR that is
intended to reform and expand Australia's managed funds
industry by removing impediments to international investment.
This announcement reflects the Government's in-principle
support for the following recommendations made in the Johnson
The introduction of an IMR of wide application; and
A review by the Board of Taxation of the scope to provide a
broader range of tax flow through collective investment
The Government also acknowledges the recommendation from the
Henry Tax Review that taxation arrangements applying to Australian
managed funds should be improved to provide greater certainty that
conduit income will not be subject to Australian tax as part of
this reform process.
This announcement follows announcements made previously:
On 7 May 2010, the Assistant Treasurer announced a new taxation
regime for MIT's in response to the Board of Taxation's
report entitled Review of Tax Arrangements applying to Managed
On 16 April 2010, the Assistant Treasurer's released for
public consultation the exposure draft legislation to amend the MIT
definition for withholding tax purposes
For further details, please refer to the Moore Property News
edition entitled 'MIT – a new tax regime' and
Moore Tax News edition entitled 'Managed Investment Trusts
– a uniform definition'.
Various approaches are taken by law firms in calculating the GST payable by a purchaser under a contract for the sale of property which attracts GST.
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