Business taxation Finance Foreign income tax offsets

New developments in investment management, from Burton, to tax standards

Published: 28 Feb 2023


Financial services are a constantly moving beast. With a new government and changing legislation, tax professionals working in financial services have been kept on their toes lately, and have plenty of topics – new and old – to learn or relearn as they work to support clients.

Investment funds are a key area of financial services where we can see new rules and regulations having an effect. Tax issues related to investment funds have a huge impact – they can drive performance, outcomes and customer experience.

Recent developments in investment management have generated both technical and practical issues for fund managers, advisors and others in the industry.

Foreign capital gains, foreign income tax offsets and Burton’s case

In 2019, the Federal Court unanimously decided in Burton v. Commissioner of Taxation [2019] FCAFC 141 that Australian taxpayers, to whom the 50% capital gains tax (CGT) discount applies are only entitled to a foreign income tax offset (FITO) in respect of half of the US tax paid in respect of gain. 

This has had a huge impact on foreign capital gains and offsets for the industry, how its calculated, whether it can be passed, and how it can be disclosed to beneficiaries.

Siew-Kee Chen, CTA, Partner at Deloitte, says that this is a pressing topic set to be discussed at the upcoming Financial Services Conference. Siew-Kee will be facilitating a panel discussion at the conference, providing a tax update and discussing practical issues for fund managers.

‘This is a live issue, that practitioners in the industry are grappling with daily, particularly for year-end distributions coming up this year. It will be one of the key focal points in the panel discussion,’ he says.

‘We will cover what we are seeing from tax authorities, and the impact that the change in government has had on investment management.’

Some other key topics on the agenda for the panel session include ATO developments, tax governance and third party data, adoption of the new fund Corporate Collective Investment Vehicle (CCIV) and the tax data standard.

Tax data standards and CCIV

Michael Potter, Policy Director, Economics and Tax at the Financial Services Council, will be presenting at the panel session facilitated by Siew-Kee, sharing his perspective on these issues affecting fund managers on a day-to-day basis.

Both Michael and Siew-Kee were closely involved with the development of CCIV legislative reform and will discuss it during the panel session.

‘I've spent most of my time at the Financial Services Council working on some key tax issues for management funds,’ Michael says.

‘The CCIV has been a really important issue, and I was very pleased to be closely involved in the work on that. The work that the FSC did, with its members, led to some important improvements in the CCIV’s compared to early drafts, and I am proud of those achievements, and what  we've managed to achieve with that legislation. However more still needs to be done and that’s going to be a topic of conversation at this session.’

One topic quickly gaining importance for the financial services and investment fund sector, is tax data standards.

Developed by the Australian Custodial Services Association (ACSA), this sets out a ‘standard data set and common market practice guidelines for automating the exchange of Australian managed fund tax data’.

‘The ACSA tax data standard is something that we [the FSC] are helping them develop,’ Michael says.

‘It’s a very important development in the industry, with a great deal of potential to help the industry. It should harmonize the use of data across the industry, it will potentially eliminate many manual processes, and it could significantly reduce costs to many areas of the industry.’

Investment management update, reconnecting and Ken Henry at the Financial Services Conference

Next month at the Financial Services Taxation Conference in Melbourne, Michael and Siew-Kee will be joined in their panel session, Investment management update, by Jodie Bosler, State Street and Nari Kye, CTA, Deloitte.

Siew-Kee and Michael, who are both also on the organising committee for the event, both said they were looking forward to the event as a whole, with a few standouts inthe program.

‘I am really looking forward to connecting in person with delegates from across the industry, including in-house teams, tax authorities, fellow advisors, and lobby groups. We have the incredible privilege of hearing Dr. Ken Henry, our keynote speaker, open the conference,’ Siew-Kee says.

‘This is the leading Financial Service Tax Conference in the country, and has been for many years. In our panel session on investment management, we have assembled leading tax experts from across the industry, bringing a diverse range of insights and perspectives on the very latest tax developments in investment management.’

While there are plenty of issues to discuss in financial services , and some that aren’t readily answered by the law, gaining an understanding of how to approach and resolve them is a key takeaway from the conference.

‘A session I’m particularly keen on is the ATO session where we’ll be hearing about its priorities for the industry. I'm also really keen to hear from Dr. Ken Henry about tax reform priorities,’ Michael says.

‘This event is the highlight of the year for tax professionals in financial services. It's a great opportunity to catch up with people you may not see in person, and even meet people you've dealt with extensively during COVID, but haven't actually ever met in person. We’ve got a great range of topics. It's a great opportunity to get away from the office and hear about all of them in one go.’

Find out more about the Financial Services Conference.

About Siew-Kee Chen

Siew-Kee Chen, CTA, is a Partner at Deloitte. He is the Deloitte Asia Pacific Regional Tax & Legal Leader for Investment Management. Siew-Kee is recognised as a leading tax adviser in investment management. Siew-Kee has over 26 years’ experience providing tax advisory services to financial services, real estate, private equity and infrastructure clients and advising throughout the entire deal life cycle, including mergers and acquisitions, due diligence, tax compliance and divestments. He delivers practical and commercial expertise to clients, drawing from his previous role as the Head of Tax of an Australian listed group. Siew-Kee has been heavily involved in the tax reform design for Management Investment Trusts, CCIVs and Financial Services. 

About Michael Potter

Michael Potter jointly leads the FSC’s work on the Design and Distribution Obligations and leads the FSC’s work on tax and economics. Michael previously worked at the Centre for Independent Studies, the Parliamentary Budget Office, the Federal Department of Treasury, the Department of Prime Minister and Cabinet, the National Farmers Federation and the Australian Chamber of Commerce and Industry. He has over 20 years’ experience in public policy, particularly economics and tax issues. Michael has a Master of Applied Economics from the Australian National University, and Bachelor of Economics with honours from the University of Sydney. He is a graduate of the Australian Institute of Company Directors.