On 17 December 2010, the Assistant Treasurer announced that the Government would introduce amendments to the tax law to prevent the Australian Taxation Office from raising assessments for certain investment income of foreign managed funds for the 2009-10 income year and previous income years. This announcement was made to address a key area of investment uncertainty for US-based fund managers investing in Australia arising from the application of US accounting standard 'FIN 48'. In the 2011-12 Budget, the Government announced that it would extend the measure to include the 2010-11 income year.
On 19 January 2011, the Assistant Treasurer announced that the Government would introduce changes to the tax treatment of certain investment income of foreign funds where those funds are taken to have a permanent establishment in Australia by virtue of the fact they have engaged an Australian based intermediary. These changes are often referred to as the 'conduit income' amendments. Under the change, income from relevant investments of a foreign fund, that is taken to have a permanent establishment in Australia, will be exempt from income tax.
The Assistant Treasurer and Minister for Financial Services and Superannuation, the Hon Bill Shorten MP, has now released exposure draft legislation for the proposed changes.
The FIN 48 changes apply to the 2010-2011 income year and prior years. The conduit income changes apply from the 2010-2011 income year.