Mark Dreyfus (Isaacs, Australian Labor Party, Shadow Attorney General) Share this | Link to this | Hansard source

My question is to the Prime Minister. The minimum outside investment for the Bowery Opportunity Fund registered in the Cayman Islands and invested in by the Prime Minister is US$1 million. Why does the Prime Minister consider it appropriate to actively invest in this exclusive fund registered in a notorious tax haven when the Australian government is claiming to be working in the G20 to address profit shifting and tax evasion?

Tony Smith (Speaker) Share this | Link to this | Hansard source

Before I call the Prime Minister, I am going to remind members about the standing orders and questions—that is, that questions are not permitted purely about a minister's or a prime minister's private affairs; there needs to be a connection with their responsibilities. I have listened very carefully and that connection has been made on this question. But I am just alerting members now.

Malcolm Turnbull (Wentworth, Liberal Party, Prime Minister) Share this | Link to this | Hansard source

When I became the Minister for Communications, I took great care, working with the Secretary to the Department of the Prime Minister and Cabinet, to ensure that all of my investments were in a form that would not offer any conflicts of interest. That is why my and Lucy's investments are almost entirely composed of investments in managed funds outside of Australia to avoid conflicts within Australia. Of course, the virtue of a managed fund is that the investor has no say in where the manager puts the money.

I noticed this morning the shadow Assistant Treasurer offering me investment advice. I thank him for it, but perhaps he should stick to his day job. He suggested that I should invest in a large Australian industry super fund. So that honourable members are aware, the reason I did not invest in large managed funds like that in Australia is that they are indexed funds and have a very large exposure to Telstra. As I was communications minister I had a lot to do with Telstra. So the whole focus was to avoid conflicts.

In terms of the managed funds resident in the Cayman Islands, let me be quite clear: most hedge funds—and I think the one the honourable member mentioned is a good example—have an onshore US-based entity and an offshore one, which might be located in Singapore, the Cayman Islands, Ireland or Luxembourg. The reason for that is so that non-US investors, when they invest, will receive their income without US withholding tax.

The consequence of an Australian investor investing in a managed fund of that kind located in the Cayman Islands is that all of the income that is paid to that Australian investor is taxed in Australia and paid to the Treasury. If the Australian investor invested in a managed fund that was located in the United States, there would be a 15 per cent US withholding tax, so at least 15 per cent of the tax paid would go to the United States government. The choice of the offshore vehicle means that more tax is paid in Australia than otherwise. The same amount of tax is paid, but more of it is paid in Australia. That is the consequence of the arrangements. There is no tax avoided in Australia. In fact, more tax is paid in Australia as a consequence.