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04 Apr 13 Investment Manager Regime - Element 3

On 16 December 2011, the Minister for Financial Services and Superannuation, Bill Shorten, announced the Australian Government’s intention to implement the final element (of three) of the Investment Manager Regime. The purpose of Element 3 of the Regime is to provide tax certainty to widely held foreign managed funds investing in Australia. It will do this by aligning the tax treatment of certain income or gains made on revenue account with the treatment of comparable returns or gains made on capital account. It will only apply to funds domiciled in countries that are recognised by Australia as engaging in effective exchange of information.

At the same time, the Minister also announced that Element 2 of the regime (which exempts from Australian tax the conduit income of a foreign fund’s portfolio investments) will be extended to foreign non-portfolio investments of managed funds.

On 21 December 2012, the Minister further announced changes to the Investment Manager Regime that will also impact the first two elements of the regime, previously enacted in the Tax Law Amendment (Investment Manager Regime) Act 2012. In particular, problems with the operation of the existing widely held and concentration tests will be addressed to enable membership interests of the fund to be effectively traced through to the underlying members.

Treasury has now released exposure draft legislation which aims to implement these announced changes.

The closing date for submissions is Friday 26 April 2013.


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