The Federal Government has passed its Tax Laws Amendment (Investment Manager Regime) Bill 2012 through parliament, which aims to reduce uncertainty around the use of Australian fund managers by international investors.

 

"This will make Australia more attractive as a destination for investment and encourage employment in the financial services sector," the Minister for Financial Services and Superannuation, Bill Shorten said.

 

This legislation constitutes the first two elements of the Investment Manager Regime (IMR), which are designed to:

  • address the impact of the application of US accounting rules - widely referred to as 'FIN 48' -on managed funds which invested in or through Australia in the 2010-11 and earlier income years;
  • exclude from Australian tax, for 2010-11 and later income years, certain income of widely held foreign funds that is taxable only because the fund uses an Australian based agent, manager or service provider; and
  • remove uncertainty as to the tax treatment of 'conduit income' of managed funds as recommended by the Henry review.

 

The reforms are the key recommendation of the Johnson report commissioned by the Government to investigate possible reform pathways that would enable the financial services sector take full advantage of better serving international investors.

 

These amendments will remove the potential for uncertainty regarding the Australian tax treatment of certain foreign fund income and will allow foreign investors to move forward in their arrangements with confidence of their Australian tax position relating to earlier years.

 

It will ensure that the law does not operate to discourage foreign funds from engaging the services of an Australian financial intermediary.