12 March 2021

Amending Australia's Offshore Banking Unit Regime

The Morrison Government will take action to avoid Australia being designated a harmful tax regime by the OECD and the European Union by introducing legislation into the Parliament to reform Australia’s Offshore Banking Unit (OBU).

The OBU, established in 1992, provides a more attractive tax rate for offshore banking activity conducted by Australian registered banks.

In October 2018 the OECD’s Forum on Harmful Tax Practices (FHTP) raised concerns during a review of this regime, including the concessional tax rate and the ring-fenced nature of the regime.

In response, the Government amend the OBU to address these concerns by removing the preferential tax rate and closing the regime to new entrants.

Existing participants operating within the OBU regime will continue to access the concessional tax rate for a period of two years - up to the end of the 2022‑23 income year.

The Government will use this time to consult with industry on alternative measures to support the industry and ensure activity remains in Australia once the two year grandfathering period ends.

These changes reaffirm Australia’s commitment to support the OECD to address harmful tax practices and will promote continued cooperation with other jurisdictions on tax matters.

The Government looks forward to consulting with affected parties to ensure that Australia remains globally competitive and an attractive market for financial services.