Bill Shorten (Maribyrnong, Australian Labor Party, Minister for Financial Services and Superannuation) Share this | Hansard source

Firstly, I thank those members who have taken part in the debate on this bill in a rare moment when the opposition is following the government's lead and agreeing. I am grateful for that. They should try it more often.

Mr Buchholz interjecting—

They should try it more often. It doesn't hurt. In fact, they could lie back and enjoy it.

This bill introduces the first two elements of an investment manager regime, which was a key recommendation of the Johnson report by the Australian Financial Centre Forum into Australia's financial services sector. The bill will provide for greater certainty for the tax treatment of foreign funds. Foreign-managed funds use various types of entities and complex structures through which moneys raised from various individuals and institutions are invested. These entities and complex structures raise various and in many cases quite complex tax issues. Because of these complex issues and to ensure that the provisions of the bill address the legitimate concerns of the funds management industry, the government have consulted widely in the development of the measures in this bill.

The consultations included those on the issue of a consultation paper in 2010, exposure draft legislation in 2011 and a second exposure draft earlier this year. Our government consulted Australian and international tax advisers, representatives of the Australian financial sector and representatives of foreign funds, including but not limited to: the Australian Financial Centre Taskforce, formerly the Australian Financial Centre Forum; the Financial Services Council; the United States Managed Funds Association; and London and Asian fund managers. In addition, there have been numerous meetings with expert practitioners, including leading lawyers, accountants and financial advisers.

I thank the various organisations which have contributed to the consultation process on the measures in the bill. The government are committed to ensuring that the IMR legislation achieves its policy objectives, and we will continue to engage with industry to ensure that the objectives of the legislation are delivered. I am grateful for the Treasury Department's work on the bill. Treasury's consultation with industry has highlighted that it is not possible to define in legislation all of the different investment entity structures operating in eligible offshore jurisdictions. Where entities satisfy the policy intent of the measures in this legislation, the government will use the regulation-making power provided in the legislation to ensure that they benefit from the IMR.

Our government will consult with industry in developing these regulations as it has with the legislation. Our government remain committed to ensuring Australia's taxation arrangements for passive portfolio investments are in line with those of major financial centres such as the United States, the United Kingdom, Hong Kong and Singapore.

Schedule 1 to the bill will prescribe the tax treatment of conduit income of widely-held foreign funds. The amendments are designed to ensure that the complex tax issues that can currently arise do not operate to discourage foreign funds from encouraging the services of an Australian intermediary, for instance, an investment manager. These amendments will ensure that the investment income of a foreign entity is not subject to tax in Australia simply because it engages an Australian adviser where the income would not otherwise have an Australian source. This will encourage employment in our Australian financial services sector, particularly in highly skilled jobs.

Schedule 2 to the bill will address the uncertainty surrounding the impact of the United States accounting standard ASC740-10, otherwise known as FIN 48. This measure will remove the potential for uncertainty regarding the Australian tax treatment of certain foreign fund income in previous income years and will allow foreign investors to move forward in their arrangements with confidence regarding their Australian tax position relating to earlier years.

Our proposed amendments are designed to clarify the taxation treatment of certain income of foreign funds which have not lodged a tax return or have had an assessment made of their income tax liability. Where the conditions of the provisions are met, certain types of investment income and gains will be exempt from Australian tax. In addition, losses or outgoings in respect of certain investments will be disregarded.

These amendments will support the Australian funds management industry and are in line with the government's objective to secure Australia's position as a financial services centre. They are in line with the other significant pieces of legislation and policy decisions of this government to encourage a thriving and robust financial services industry in Australia. This bill deserves the support of the House. I commend the bill to the House.

Question agreed to.

Bill read a second time.

Ordered that this bill be reported to the House without amendment.

Federation Chamber adjourned at 10:32.

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