Australia’s new “investment manager regime” provides wide exemptions from Australian tax on foreign investments into Australia.

​Investment manager regime

Effective 1 July 2015, the new “investment manager regime” provides a much simplified tax system for inbound foreign investors, and should be a welcome change for foreign investors who struggle with the complexities of the Australian system.

Under the new rules, a foreign investor with passive “portfolio” (i.e. <10%) financial investments in Australia will only suffer Australian tax on traditional income flows such as dividends, interest or trust distributions.  No tax will apply to trading or capital profits made from acquisitions and disposals of Australian securities, or derivatives or debt securities.

To access the concession, a foreign investor need only be widely held (largest shareholder <20% or largest five shareholders <50%), or appoint an independent Australian investment manager to manage its investments.

Whilst targeted at collective investment vehicles, the rules are expressed to apply to all kinds of offshore entities.  Widely held corporates (including banks and financial institutions) that are resident in non-treaty countries no longer need to navigate Australia’s complex “source rules” when transacting financial arrangements, such as portfolio equities, derivatives or debt securities, in Australia.