On 12 March 2015 the government released exposure draft legislation, comprising a draft Bill and a draft Explanatory Memorandum, implementing an announcement made on 6 November 2013 that it would proceed with certain reforms to the Offshore Banking Unit (OBU) regime.
These reforms address a number of integrity concerns with the existing regime while ensuring the OBU regime targets mobile financial sector activity.
The exposure draft Bill is the Tax and Superannuation Laws Amendment (2015 Measures No 2) Bill 2015: Offshore banking units.
The proposed amendments in the draft Bill:
- limit the availability of the OBU concession in certain circumstances where it could otherwise be used to convert ineligible activity into eligible activity by trading in a subsidiary
- codify the “choice principle” to remove uncertainty for taxpayers
- introduce a new method of allocating certain expenses between the operations of a taxpayer’s domestic banking unit and the OBU
- modernise the list of eligible activities, and
- treat internal financial dealings (for example, between an Australian bank and its offshore branch) as if they were on an arm’s length basis.
Submissions on the proposed legislation are invited; the closing date for submissions is Wednesday, 8 April 2015.