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Australia To Improve Fund Manager Tax Regime

August 2011 - Tax & Private Client. Legal Developments by Hassans.

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The Australian government is promoting Australia's fund managers and financial expertise to overseas investors by releasing draft tax legislation that will bring Australia's investment manager regime more closely in line with other financial services centres.

The amendments to income tax law will clarify how certain income of foreign funds, for 2010-11 and prior income years is taxed. It will also clarify the treatment of certain investments of foreign funds, where the returns or gains are treated as being attributable to a permanent establishment in Australia.

The Assistant Treasurer and Minister for Financial Services, Bill Shorten, said:

"The proposed changes in tax treatment provide certainty for businesses investing through Australian intermediaries."

"Australia's taxation of foreign managed funds is not consistent with other financial centres, including the US, the UK, Hong Kong and Singapore. These new measures will help Australia retain AUD57bn (USD60bn) already invested here by foreign managed funds."

Shorten said that the proposed amendments will support Australia's managed funds industry, which stood at around AUD1.8 trillion at the end of March 2011.

"The draft legislation is a further step in the Gillard government's commitment to position Australia as a leading financial services centre," the Assistant Treasurer said.

The proposals have been made in response to a recommendation by the report of the Australian Financial Centre Forum concerning the tax treatment of funds management vehicles.

As part of the 2011/12 Budget, the government asked the Board of Taxation to bring forward its review of the full funds management Investment Management Regime. The Board of Taxation will now report to the government by September 30, 2011 in relation to this issue.

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