The Government has released draft legislation that will bring Australia's investment manager regime more closely in line with other financial service centres.
The draft legislation, entitled 'Investment Manager Regime Amendments', will clarify how certain investments of foreign funds for 2010-11 and prior income years are taxed.
Under the change, income from relevant investments of a foreign fund, that is taken to have permanent establishment in Australia by way of an Australian-based adviser, will be exempt from income tax.
The policy, referred to this as 'conduit income', has been extended from the 2009/10 financial year in order to address a key area of investment uncertainty for US-based fund managers investing in Australia.
Assistant Treasurer and Minister for Financial Services Bill Shorten said the proposed changes will provide certainty for all international businesses investing through Australian advisers.
"Australia's taxation of foreign managed funds is not consistent with other financial centres, including the US, the UK, Hong Kong ad Singapore," Shorten said.
"These new measures will help Australia retain $57 billion already invested here by foreign managed funds."
Shorten's announcement comes after a recommendation made by Financial Services Council (FSC) into an Australian Financial Centre report that looked at the tax treatment of funds management vehicles.
FSC CEO John Brogden, said he has certainty that the proposed changes will provide foreign investors.
"The importance of this change cannot be underestimated - it removes a major barrier to Australian based fund managers attracting foreign investment," said Brogden.
The proposed legislation is available on the Treasury website and open for submission until 30 August.
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