The Rudd Government will start consultation on an investment manager regime (IMR) that will reform and expand Australia's managed funds industry by removing impediments to international investment.
These important reforms will build on Australia's growing status as a leading regional financial centre and support growth and jobs in the Australian managed funds industry.
Australia's managed funds stood at around $1.7 trillion at the end of 2009, equal to around 135 per cent of nominal GDP. With one of the largest pools of funds under management in the world, Australia is well placed to build up its position as a leading regional financial centre.
These reforms will draw on the recommendations of the Australian Financial Centre Forum report, also known as the Johnson Report.
The Johnson Report recommended that:
- the Government introduce an Investment Management Regime (IMR) of wide application; and
- the Board of Taxation review the scope for providing a broader range of tax flow through collective investment vehicles.
The Government supports in principle both of these recommendations.
The independent Australia's Future Tax System review also recommended that the taxation arrangements applying to Australian managed funds should be improved to provide greater certainty that conduit income will not be subject to tax
To commence the two‑stage process and further develop key features of an IMR, the Assistant Treasurer and Minister Bowen today released a Consultation Paper which will form the basis for engagement with industry stakeholders. Further details on the two‑stage process are in Attachment A.
This two-stage reform process will build on the already significant improvements the Government has made to provide certainty for managed funds and ensure Australia's tax system is competitive.
Treasury and the Board of Taxation will consult widely on these issues and interested parties will be encouraged to provide comments on the Consultation Paper by 22 June 2010.
Attachment A
Investment manager regime
There is considerable merit in developing a regime that provides a set of comprehensive and clear cross‑border taxation rules for a range of entities in the financial sector.
There are a number of design issues relating to an IMR that will need to be considered, including the scope of the regime and aligning the IMR with broader arrangements for taxing collective investment vehicles. Another key design issue will be to balance the objectives of providing certainty and enhancing the competitiveness of our financial sector with maintaining the integrity of the tax system.
An important element of the IMR will be to ensure that non‑residents investing in foreign assets will not face further Australian tax on their investments when using Australian fund managers (referred to as conduit relief).
Important reforms could be made to the treatment of conduit income of managed funds in advance of the comprehensive review of collective investment vehicles. To launch this process, the Government has tonight released a consultation paper that focuses on the taxation of conduit income of managed funds.
Other design issues relating to the IMR, including the taxation of non‑resident investment in domestic assets, will be referred to the Board of Taxation as part of its broader review of the tax treatment of collective investment vehicles.
The Consultation Paper is available at www.treasury.gov.au.
Review of collective investment vehicles
The Government will ask the Board of Taxation to:
- review the tax treatment of collective investment vehicles, having regard to the new MIT tax framework and including whether a broader range of tax flow-through vehicles should be permitted; and
- as part of the review, examine the treatment of Venture Capital Limited Partnership vehicles to see if they are all necessary and consistent with the Government's objective of developing Australia as a leading financial centre.
Detailed Terms of Reference of the review, including the dates for reporting to Government, will be released in the near future.
"In undertaking its review, I will ask the Board to consider the balance between ensuring Australian fund managers can compete in the provision of services in the global economy and maintaining the integrity of the tax system and Australia's revenue base," the Assistant Treasurer said.