Australia Consults On Improving Tax Regime For Funds

by Mary Swire, Tax-News.com, Hong Kong

30 July 2008

Australia's Assistant Treasurer, Chris Bowen, last week announced that the Government has commenced a consultation on draft legislation to reform Division 6C of the Income Tax Assessment Act 1936.

This forms a key part of the Rudd Government's election commitment to tax reform that was outlined in August last year, and as part of the 2008 Budget.

"These reforms will reduce compliance costs for Australian managed funds and form an important part of the Government's commitment to make Australia a financial hub in the Asia-Pacific region," Mr Bowen explained, adding that:

"The Government has already consulted widely with industry over the last few months on reforms to Division 6C."

Key changes proposed in the consultation include:

• Clarifying the scope and meaning of investment in land for the purpose of deriving rent;
• Introducing a 25% safe harbour allowance for non-rental, non trading income from investments in land;
• Expanding the range of financial instruments that a managed fund may invest in or trade; and
• Following consultation with industry, providing a further 2% safe harbour allowance at the whole of trust level for non-trading income.

These modifications are intended make it easier for a trust to comply with the eligible investment business rules.

The closing date for comments is 14th August 2008, and the Government expects the legislation to be ready for introduction in the Spring 2008 sittings.

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