The Government on Wednesday announced a raft of changes that will support the Asia Region Funds Passport – an initiative that will drive the export of Australia’s $2.8 trillion funds management sector.
“The announced changes will remove uncertainty over tax residency issues to ensure Australia’s regime is world class and on the same footing as comparable regimes such as the United Kingdom,” Financial Services Council chief executive Sally Loane said.
Foreign investors will be given greater certainty through changes made to the Investment Manager Regime. The Government has also moved to clarify treatment under the managed investment trust tax regime to allow a greater number of trusts to enter the sector.
“There is strong and growing competition to managed money on behalf of foreign investors. A robust Investment Manager Regime, which affords foreign investors the same tax treatment whether they invest in assets directly or via an Australian fund manager, is essential for maintaining Australia’s reputation as an attractive international financial services centre,” she said.
“These changes will provide a significant boost to Australian fund managers looking to sell their skills and expertise overseas and are particularly timely with the Asia Region Funds Passport coming online from 1 January 2018.”
The final barrier
In addition, the government has announced improvements for domestic investors through greater clarity of treatment under the Attribution Managed Investment Trust tax regime, by proposing to bring investment by platform-based investors into line with the treatment offered to other large-scale superannuation and life insurance investors; certainty for specific types of single-unitholder trusts; and technical amendments to ensure the regime operates as intended.
Loane said the final remaining barrier to increasing exports of funds management to overseas investors is Australia’s complex and high non-resident withholding taxes.
“We look forward to the outcomes of the government’s review of non-resident withholding tax rates for foreign investors into Australian based funds. We encourage the government to now take the last step and ensure passive income from Australian funds is taxed in an internationally competitive manner.”
The Government’s announcement follows a review into the viability of Australia’s funds management sector as a viable export market by Mark Johnson. The report, Australia as a Financial Centre, was launched in 2009. In the report, Johnson outlined that despite having a strong, skilled, competitive and well-regulated financial services sector, the export of funds management services was low by international standards.
Australia only sources 3.4 per cent of its $2.8 trillion funds management industry from offshore funds.
This compares to our competitors in the global $94.9 trillion dollar industry such as the United Kingdom (31 per cent), Hong Kong (68.5 per cent), Singapore (80 per cent) and Luxembourg (99 per cent), whom all substantially manage more funds from offshore both as a per cent of their industry and in the value managed.