Josh Frydenberg (Kooyong, Liberal Party, Assistant Treasurer) Share this | Link to this | Hansard source

I present a supplementary explanatory memorandum to the bill, and ask leave of the House to move government amendments (1) to (13) as circulated together.

Leave granted.

I move the following government amendments, as circulated, together:

(1) Schedule 7, item 1, page 76 (line 34), omit "*permanent establishment", substitute "permanent establishment (within the meaning of the relevant international tax agreement)".

(2) Schedule 7, item 1, page 77 (line 14), omit "fund", substitute "entity".

(3) Schedule 7, item 1, page 77 (line 33), omit "permanent establishment", substitute "*permanent establishment".

(4) Schedule 7, item 1, page 78 (line 2), at the end of subsection 842-215(3), add:

  ; and (e) subsection 842-225(2) does not apply to the IMR financial arrangement.

(5) Schedule 7, item 1, page 78 (lines 11 to 15), omit paragraph 842-215(5)(b), substitute:

  (b) if the issuer of, or counterparty to:

     (i) the IMR financial arrangement referred to in paragraph (a), if it is a *financial arrangement; or

     (ii) otherwise—the IMR financial arrangement to which that arrangement relates;

     is an Australian resident, or a *resident trust for CGT purposes—during the whole of the year, the interest of the entity in the issuer or counterparty does not pass the *non-portfolio interest test (see section 960-195); and

(6) Schedule 7, item 1, page 78 (line 26), omit "a payment from which an amount", substitute "an amount that".

(7) Schedule 7, item 1, page 78 (after line 30), at the end of section 842-215, add:

(7) For the purposes of subparagraphs (2)(a)(i) and (3)(c)(i), an entity is taken to be a resident of a country that has entered into an *international tax agreement with Australia if the entity is such a resident within the meaning of that agreement.

(8) Schedule 7, item 1, page 79 (line 5), before "A *financial", insert "(1)".

(9) Schedule 7, item 1, page 79 (after line 9), at the end of section 842-225, add:

(2) Without limiting subsection (1), a sub-underwriting arrangement that is not a *financial arrangement is an IMR financial arrangement if it was entered into by an *IMR entity for the purpose of providing for the entity to invest or trade in a financial arrangement that is an IMR financial arrangement under subsection (1).

(10) Schedule 7, item 1, page 81 (line 9), omit "*independent Australian fund manager", substitute "independent fund manager".

(11) Schedule 7, item 4, page 87 (lines 16 to 27), omit the item.

(12) Schedule 7, item 12, page 90 (line 1), omit "842-209", substitute "842-208".

(13) Schedule 7, item 12, page 90 (after line 21), after section 842-209, insert:

842 -209 Residence of corporate limited partnerships

     If an IMR entity makes a choice under paragraph 842-208(2)(c), section 94T of the Income Tax Assessment Act 1936 as amended by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No.1) Act 2015, applies to the entity in relation to the income years in relation to which this Subdivision applies to the entity.

These parliamentary amendments being made to the Investment Manager Regime are to address concerns raised by industry that certain provisions lack the clarity required to allow Australian fund managers to take advantage of the IMR concession as intended. These concerns were raised with the Senate Economics Legislation Committee. Significantly, changes to the schedule ensure that sub-underwriting arrangements will be covered regardless of the outcome of the arrangement. The reference to 'permanent establishment' clearly refers to either the relevant international tax agreement or the definition in the Income Tax Assessment Act 1936. In satisfying the widely held requirement, any independent fund managers may disregard any entitlement provided that the entitlement is taxed in the year it is received. There are other technical drafting errors that are also being corrected to avoid the need to make future amendments in parliament. In addition, and consistent with the Senate Economics Legislation Committee recommendation, a supplementary explanatory memorandum has been revised to provide industry with further clarification to cover certain terms and concepts. As the IMR seeks to remove uncertainties in Australia's tax laws, these changes will ensure that foreign investors can invest through or into Australia with tax certainty and that Australian fund managers can actively market their financial services globally.

Question agreed to.

Bill, as amended, agreed to.