Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

My question is to the Assistant Treasurer. Will the Assistant Treasurer outline to the House measures taken by the government to secure Australia’s place as a financial hub?

Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I thank the member for Chisholm for her question and recognise her longstanding experience and interest in the financial sector. Australia has great potential to be the funds management hub of Asia, but that potential has been held back by the previous government’s failure to give Australia a competitive tax regime and to remove other impediments which stop the Australian funds management industry competing on a level playing field. If we can attract more funds to be managed in Australia, we will be creating well-paid, interesting jobs for our young people and promoting financial services and exports. The Australian funds management industry has several advantages over our competitors. They have built up great skills since the Keating government introduced compulsory superannuation, and we have the fourth largest pool of funds under management in the world.

Funds under management in Asia are growing exponentially, but the Australian industry is not capitalising on that growth because the shackles of an uncompetitive tax regime have not been taken off. But I am pleased to report to the House that last Thursday night the Senate passed legislation which reduces Australia’s withholding tax rate. Despite the reservations that were expressed by the shadow Assistant Treasurer in this House, the Senate passed the legislation last Thursday. I am pleased to report that Australia will go from having the highest withholding tax rate in the world to one of the lowest, in three years. We will go from being one of the most uncompetitive tax regimes in the world to the most competitive in the course of three years.

But it is not just the uncompetitive tax rates when it comes to the Australian funds management industry; there is also the complexity and burden of Australia’s tax regime. It is vital that we have a simple and transparent tax regime for Australia. The rules that apply to managed funds are burdensome and complex, but the government has begun to reform the part of the tax act which applies these burdensome and complex rules to the funds management industry. We are moving to correct the worst anomalies in this part of the tax act.

In the longer term, we need a specifically designed tax regime for the funds management sector. Other countries have done it. The United States has done it. New Zealand has done it. Canada has done it. The United Kingdom has done it. But the previous government simply failed to do it. We are doing it. The first reference of the new government to the Board of Taxation was a specifically designed, purpose-built funds management tax regime.

But there is more to do. We need to work with the sector to identify areas that are holding back the ability to compete. I am pleased to inform the House that in Sydney on 31 July the federal government and the New South Wales government will be holding a financial services hub summit, which will be opened by the Prime Minister, to build on the work that this government have already done which the previous government failed to do over 12 years, to work with industry, academics and government to determine what else needs to be done to build on the work and reform we have already embraced in six months in office. More has been done in those six months than was done in the 12 years of the coalition government.

It falls to government to take long-term, tough decisions to build Australia’s economic future. Cheap populism will not build a financial services hub and cheap populism will not create well-paid and interesting jobs for Australians, but serious policy development will. That is what the previous government failed to do. That is what we will continue to do.