The Australian Financial Centre Forum (the Forum) was established by the Australian Government and is designed to ‘position Australia as a leading financial services centre’ and ensure policy settings allow for Australia to take full advantage of global business opportunities, especially those in the Asia-Pacific region. Following a review of the financial services sector by the Forum, it issued a report, ‘Australia as a Financial Centre’ (the Report), which focuses on a number of areas where ‘sensible policy changes will…lead to a more competitive, efficient and internationally engaged financial sector where offshore participants want and need to do business’.
The Report sets out a number of key recommendations, which include (among others):
- tax exemptions / concessions for use of an independent Australian resident adviser, manager etc by a non-Australian resident investor - the introduction of an ‘Investment Manager Regime’ which would apply to both retail and wholesale funds, pursuant to which a non-Australian resident investor using an independent Australian resident investment adviser, fund manager, broker, exchange or agent would be exempt from any tax liabilities in Australia for investments in non-Australian assets, and any investments in Australian assets would for tax purposes be treated the same as if the investments were made directly by the non-resident investor without use of any Australian intermediary;
- tax exemptions / concessions for use of a dependent Australian resident adviser, manager etc by a non-Australian resident investor - under the ‘Investment Manager Regime’, a non-resident investor using a dependent intermediary acting at arm’s length would be exempt from any tax liabilities in Australia for investments in non-Australian assets, and any investments in Australian assets would be treated as they are currently (i.e. the non-resident investor may be subject to Australian income tax in certain circumstances), subject to an agreed ‘de minimis’ exemption to cater for global investment strategies that may include a nominal portion of Australian assets (any Australian assets under this exemption would be treated the same as if the investments were made directly by the non-resident investor without use of any Australian intermediary);
- central management and control in Australia should not of itself give rise to Australian tax residency - importantly, under the ‘Investment Manager Regime’, the location of central management and control in Australia of entities that are part of the regime will not of itself give rise to Australian tax residency of those entities;
- need for a review of the scope for providing a broader range of tax flow-through collective investment vehicles - the Forum has suggested that Australia’s tax law currently limits the range of commercial vehicles that can be used to manage funds to that of a unit trust, taking into account tax flow-through and investor protection and commercial needs. The Report provides that it would be beneficial, especially from a non-resident investor perspective, to review and develop a wider range of potential funds management vehicles which allow for tax flow-through and investor protection beyond unit trusts, such as corporate vehicles and limited partnerships (with which non-resident investors are generally more familiar). As part of this review, the Forum recommends restrictions on the Venture Capital Limited Partnership vehicle available in Australia be examined; and
- development of an ‘Asian Region Funds Passport’ - this would go beyond a series of bilateral mutual recognition treaties by providing a ‘multilaterally agreed framework allowing the cross-border marketing of funds amongst member countries’, similar to Europe’s UCITS framework. The Forum considers that such a framework could allow for Asia-Pacific based funds to gain greater access to other markets. Importantly, the Report states that the Asian Region Funds Passport must be seen as one part of a package of interdependent proposals (i.e. in conjunction with the ‘Investment Manager Regime’ and the introduction of a wider range of funds management vehicles as described above).