In media release No 2011/168, issued 16 December 2011, the Minister for Financial Services and Superannuation, Bill Shorten, announced that the Government would implement the third and final element of an investment manager regime (IMR), which was a key recommendation of the Johnson Report. It will be backdated to 1 July 2011.
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.
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 here The Government's response to the Board's recommendations can be found in the attachment to the media release.
In media release No 39, issued 16 December 2011, the Chairman of the Board of Taxation, Chris Jordan, welcomed the announcement of the Minister. The Chairman also noted that the Board is continuing with its broader review of the tax arrangements applying to collective investment vehicles. The Board expects to finalise this review by 31 December 2011.