Damian Welshe FTIA (Damian Welshe & Associates), Tim Kyle FTIA (Greenwoods & Freehills) and Tamera Lang ATIA attended the Board of Taxation's consultation meeting on the review into Islamic finance products. The purpose of the meeting was to provide information on the discussion paper and to seek feedback on issues raised in the paper. The discussion paper includes a comparative analysis of the treatment of Islamic finance products/transactions in a number of jurisdictions, and a series of case studies examining how the existing Australian tax law applies to those products. It is important to note that the government is not proposing to offer concessions or special treatment to Islamic transactions, rather the Board's instructions are to examine the difficulties encountered by the products/transactions and how those difficulties may be overcome. The private sector members drew the Board's attention to possible interactions with IMR and MIT, emphasising that any outcomes of the review would be crucial to the managed fund industry. The group also discussed whether specific provisions would need to be introduced to deal with Islamic products, or whether existing provisions (particularly those with a "substance over form" approach) would be sufficient. It was acknowledged that that the GST law will in many instances provide adverse outcomes for Islamic transactions. GST parity with conventional finance products is inherently difficult due to the different legal structure of Islamic products, and therefore the Board will be seeking ways to overcome these difficulties.
The Taxation institute is preparing a submission to the Board of Taxation, and is seeking volunteers to assist drafting parts of the paper. If you have a particular interest in this area and would like to be involved, please contact us at Tax Policy