On 16 December 2011 the Federal Government announced the final
element of the new
Investment Manager Regime (IMR), as proposed
by the Board of Taxation.
These announcements complement and extend the concessions
previously announced throughout 2011 that seek to position
Australia as a financial services hub for managing the Asia-Pacific
region's wealth by removing tax uncertainties. See
our Update of
14 September 2011.
The exposure draft legislation released on 16 August 2011
prevented a foreign fund from having a permanent establishment in
Australia simply because it used an Australian fund manager.
However, it didn't address the issue of whether the income had
an Australian source.
The new announcement includes a comprehensive IMR that greatly
expands the previous exemptions. The most substantial feature
is an exemption from taxation for income and gains which have an
Australian source. The exemption will only apply in respect
of income and gains from portfolio interests (ie a less than 10%
Other key features recommended by the Board of Taxation and
endorsed by the Government include:
limiting the exemption to foreign funds domiciled in countries
which have entered into information exchange agreements with
foreign funds covered by the IMR will not be treated as
eligibility for the IMR will be subject to a look-through,
widely-held test, with a commitment that the test will be as simple
the exemption will apply to gains and losses from a prescribed
list of investments, which will be open to industry consultation,
but is likely to include:
portfolio investments in ASX listed entities, even if they are
portfolio investments in non-ASX listed entities only if they
are not 'land-rich';
land transactions will not be prescribed investments; and
carrying on or controlling trading businesses will not be
withholding taxes will continue to apply to dividends, interest
and royalties; and
work will continue around adequate integrity measures.
The Government has foreshadowed legislation coming before
Parliament in the first half of 2012, but effective from 1 July
2011. The drafting of the legislation will be critical to
ensure the scope of exemptions is consistent with this
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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