Budget fails to address tax uncertainty for $57billion of foreign investment
Lack of tax certainty threatens foreign investment
10 May 2011: Deloitte has called on the Government to provide tax certainty for investment in Australian equities by foreign managed funds after the Federal Budget failed to confirm in what circumstances these funds would be liable to tax in Australia.
“The managers of offshore funds have waited for over two years to get resolution of this issue,” said Peter Madden Deloitte Partner and international tax specialist. “The Government should have provided policy certainty in this latest Budget instead of waiting on the results of a Board of Taxation review into Investment Manager Regime (IMR) before making its final decision.
Despite the extension of the previous exemption announced 17 December 2010, for the taxation of profits made by foreign managed funds investing into Australian listed companies, from 30 June 2010 until 30 June 2011, there is no certainty as to whether profits realised after 30 June 2011 will be liable to tax in Australia.
“The resulting uncertainty will discourage further investment in Australian equities and encourage existing investors to sell prior to 1 July 2011.
“Until this issue is resolved the Australian stock exchange continues to be a less attractive destination for this huge source of investment funds.
“The only positive is the request by the Government to the Board of Taxation to fast track its IMR report as it relates to foreign managed funds to 30 September this year, so the Government can make a final decision on the tax treatment of this investment,” concluded Mr Madden.