The federal government has called for submissions on draft legislation of the first stage of the Investment Manager Regime (IMR), which would help create a more welcome tax environment for foreign funds investing in Australia.
"The revised draft takes into account issues raised by stakeholders with the previous draft and demonstrates the government's commitment to consultation and to working with industry to implement these important reforms," Financial Services and Superannuation Minister Bill Shorten said in a statement yesterday.
A friendly tax regime and the so-called Asian passport are seen as the levers for opening Asia's $2.7-trillion investment market to fund managers here.
The Asian passport, which is set to be piloted in the next year or so, would open Australian funds to investment from the Asia-Pacific region and vice versa.
The first stage of the IMR had two objectives, Shorten's office said.
Firstly, it aims to alleviate the impact of United States accounting standard FIN 48, which requires an investment fund adopting US GAAP accounting standards to report 'uncertain tax positions'.
The US tax measure is an issue for funds investing here because Australian tax law is murky in this area, as highlighted in the so-called Johnson report on transforming Australia into a world-class financial centre.
Lack of clarity surrounded residency rules, source rules and whether a fund had a permanent establishment in Australia, according to Norton Rose partners Fadi Khoury, Peter Norman and Anna Wilson.
The first phase of IMR also addresses uncertainty around foreign-managed funds that use Australian advisers and are, therefore, potentially liable to some or all of the fund's income being subject to Australian tax.
The deadline for submissions for the first phase is 4 April.
Legislation for the second and final stage of IMR had not yet been drafted and consultation would be undertaken later, Shorten's office said.
