The Assistant Treasurer has recently announced a new exemption for foreign funds that use Australian fund managers. The exemption allows income from relevant investments of a foreign fund that is taken to have a permanent establishment in Australia will be exempt from income tax. The change will apply to the 2010-2011 and later income years.
The exemption is designed to address the situation where a foreign managed fund is taken to have a permanent establishment in Australia because of an Australian intermediary that is a dependent, branch or subsidiary of the foreign fund.
This is welcoming news for Australian fund managers as it means that it more likely that foreign based funds will use Australian based fund managers.
The Assistant Treasurer noted that the exemption will “align Australia’s taxing rules with international practice, such as the United Kingdom’s Investment Manager Exemption” and addresses a key finding of the Johnson Report, that the tax law discouraged the use of Australian based investment advisers.
The full announcement can be accessed here.