The Australia-Hong Kong mutual recognition of funds (MRF) scheme was initially launched almost 10 years ago but it has not resulted in any real flows in either direction to date. At the end of a recent SFC briefing on the France-HK MRF scheme however, the local regulator reminded the Hong Kong fund industry of some new Australian tax developments which are relevant in the context of the Australia-HK MRF programme. In July 2017, the Minister for Revenue and Financial Services in Australia, Kelly O’Dwyer, discussed several Australian tax incentives designed to encourage the use of Australian fund managers, which would apply to Hong Kong domiciled funds investing in Australia. Although Hong Kong based fund managers had expressed interest in registering their funds in Australia at the time of the launch of the Australia-HK MRF, momentum has been slow.

In terms of Australian funds coming to Hong Kong and being available for investment by the Hong Kong retail public, there has unfortunately not been much take up in the scheme either. One of the practical difficulties an Australian domiciled fund would face in Hong Kong is the fact that Australian funds tend to be managed by a "responsible entity" and the investment management and custodial functions are both undertaken by that same entity. In contrast, local regulations require that the custodian of all SFC authorised funds be separate and independent from the investment manager. Another potential hurdle for Australian funds coming to Hong Kong is that the fund would only be able to raise up to 30% of its AUM from the Hong Kong market. As indicated on the SFC’s website, the relevant application checklist for Australian funds seeking SFC authorisation is being updated.