The federal government was denying Australian fund managers access to massive overseas investments by delaying the Investment Manager Regime (IMR), the opposition assistant treasury spokesman said yesterday.
Senator Mathias Cormann said Labor’s slow legislative pace was blocking Australia from becoming a regional financial services centre, as recommended by the Johnson report, led by former investment banker Mark Johnson, released in January 2010.
The IMR would clarify the tax treatment of offshore investment through fund managers and other intermediaries in Australia. The change would allay concerns over a double tax hit, allowing Australia to better compete for an estimated $2.7 trillion worth of funds in the Asia-Pacific region.
“The coalition supports the recommendations of the report in principle, and we actively support and encourage measures that would help achieve the vision of Australia as a financial services hub,” Cormann said in a statement.
“However, in more than two years since the report was released, Labor has yet to finalise the legislation that would make this vision a reality.”
Meanwhile, Financial Services Minister Bill Shorten’s office lambasted the coalition over its failure to fully support the recommendations in the Johnson report.
“The best Senator Cormann can say is that the coalition supports the recommendations of the report ‘in principle’,” a spokesman for Shorten’s office said.
“This is because actually committing to any reforms will just add to the opposition’s $70-billion black hole.
“The coalition are so constrained by their black hole that they have boxed themselves into opposing the phasing down of Australian interest withholding tax on offshore borrowings by financial institutions.”
Cormann said Hansard documents showed Treasury had confirmed “the impact of the regime on investment decisions is unlikely to be felt until the passage of legislation”.
The IMR would bring Australia into line with Hong Kong, Singapore and other countries targeted as potential partners in the so-called Asian passport pilot program. The passport program, which may start piloting later this year, would allow Australian fund managers to market funds from a single Asia-Pacific vantage point.
“A robust and internationally competitive Investment Manager Regime would allow Australia’s world-class financial services industry to compete for investment from overseas investors, especially from the emerging economies in Asia,” Cormann said.
“This new investment would help grow the value of funds under management in Australia and increase employment opportunities in the financial services sector at a time when some parts of the sector are contracting.”
Late last year, Treasury announced a tax exemption that forms part of the IMR. The exemption excludes income, as well as gains or losses from portfolio interests or financial arrangements of foreign-managed funds in Australia from the calculation of the fund’s taxable income.
The exemption also applies to the taxable income of a fund’s non-resident investors.
That exemption is the third stage of the IMR. However, legislation for the first two stages has yet to be introduced in Parliament.
