Media Release: Government announces final element of investment manager regime

16 December 2011

Australia will aim to attract more foreign capital after the Government announced it would implement the third and final element of an investment manager regime (IMR), which was a key recommendation of the Johnson Report.

This announcement is the next step in building Australia’s reputation as a financial services centre. It will be backdated to 1 July 2011.

The Minister for Financial Services and Superannuation, Bill Shorten, said “The IMR will provide certainty of tax treatment for the funds management sector, which in Australia has $1.8 trillion of funds under management (or 131 per cent of Australia’s GDP) - $61 billion of which comes from offshore, and will further enhance Australia as a financial services centre in the Asia Pacific region.”

The announcement means income, gains or losses, which have an Australian source, from portfolio interests or financial arrangements of a foreign managed fund, will be excluded from the calculation of the fund’s taxable income (and that of its non-resident investors).

The exemption will not apply to the extent that withholding tax is currently payable on the income. Furthermore, the exemption will not cover income or gains from an interest, other than a portfolio interest in a publicly traded company, in taxable Australian property.

The exemption will be restricted to foreign managed funds domiciled in countries that are recognised by Australia as engaging in effective exchange of information.

Mr Shorten said “Tax havens need not apply.”

The third element of the IMR has been the subject of a Board of Taxation review. The Board’s report - Review of an Investment Manager Regime as it relates to Foreign Managed Funds – can be found on the Board’s website at The Government’s response to the Board’s recommendations can be found at .

Legislation for the first two stages of the IMR, announced in December 2010 and January 2011 respectively, is currently being finalised and is expected to be introduced into Parliament in the first half of 2012.

“I am announcing that, as recommended by the Board of Taxation, the Government has decided to extend the previously announced element 2 (which exempts from Australian tax the conduit income of foreign funds portfolio investments) to foreign non-portfolio investments of managed funds.”

“The implementation of the IMR for managed funds ensures that Australia’s taxing arrangements with regards to passive portfolio investments are in line with international norms and will make Australia a more attractive place to do business for foreign funds”, Mr Shorten said.

The Government will consult extensively with industry and tax professionals on the development of the legislation to implement the final element of the IMR.


Media Contact: Shannon Walker – 0414 694 476