Australia to reform offshore banking units

The Australian Government has launched a consultation on proposed reforms to its offshore banking unit regime, aimed at protecting the integrity of the corporate tax system. The changes were first announced by the now ex-Treasurer Wayne Swan, in his 2013-14 federal budget. Frist consultations were held in May and June, when government planned implementation of reforms to 1 of July. This will now be pushed back to October 1.

The offshore banking unit regime provides a concessional 10 percent tax rate for certain income from offshore banking activity, which is carried on in Australia. It is known, that the Australian Government fears that the offshore banking unit regime is being used to transfer domestic banking activities and non-banking profits into it. Although income from eligible activities is charged at an effective tax rate of 10 percent, any other income of an offshore banking unit entity is theoretically charged at the standard 30 percent corporate tax rate.

As government noticed, the difference between this tax rates has led some taxpayers to engaging in some mechanisms, that led to inappropriately access to the concessional 10 percent tax rate, including the re-characterization of ineligible income.

So, there are three main reforms were developed: 1) dealings with related parties, including the transfer of transactions between the offshore banking units and the domestic banks, will henceforth be treated as ineligible for offshore banking units treatment, 2) transactions between offshores banking units, including between unrelated offshores banking units 3) the current list of eligible offshore banking units activities will be refined.

The consultation is open until July 19.

Based on:

http://www.aph.gov.au/News_and_Events