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Restrictions placed on offshore banking units’ activities

Deloitte Federal Budget media release


Wednesday 15 May 2013:  The Treasurer yesterday announced changes to the Offshore Banking Unit (OBU) provisions to target ‘complex arrangements’ that shift income into the OBU to attract the 10% rate.

“It appears this reform has been put into place to target transactions that are similar to the ‘asymmetric swaps’ of several years ago. These were essentially swaps that an OBU, the domestic bank and an offshore institution entered into to hedge certain currencies or indexes,” Patrick Broughan, Deloitte Banking Tax Partner explained.

Broughan said that in 2010 the Commissioner had issued a determination that effectively put an end to asymmetric swap types of arrangement and that the Tuesday Federal Budget announcement seems to effectively legislate the Commissioner’s 2010 determination.  

Broughan noted that two other changes to OBUs were also flagged in the 2013 Budget papers.  

“From 1 July 2013, transacting between an OBU and a related entity won’t be treated as an offshore banking activity. Two independent OBUs were historically able to transact within the offshore banking provisions and now these activities will no longer be eligible.”

Broughan explained that the OBU regime was put in place to encourage Australia as a financial centre.

He said: “These changes have been put into place according to the Government to prevent abuse. However the concern is that the changes have the potential to discourage transactions which would otherwise support Australia becoming the Financial Centre that the Johnson Report identified.”

Deloitte’s Federal Budget 2013 website

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Patrick Broughan
Deloitte Australia
Job Title:
Partner – Tax
Tel: +61 3 9671 6606
Louise Denver
Job Title:
Director, Corporate Affairs & Communications
Tel: + 61 2 9322 7615, +61 414 889 857

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