On 17 March 2021, the Australian Government introduced a Bill into Parliament with measures to reform Australia’s Offshore Banking Unit (OBU) regime (Treasury Laws Amendment (2021 Measures No. 2) Bill 2021). The previously announced amendments are in response to concerns raised in 2018 by the Organisation for Economic Co-operation and Development Forum for Harmful Tax Practices that Australia’s OBU regime has harmful preferential tax features.
The Bill proposes to:
The Bill will also close the regime to any new entrants from the day after Royal Assent of the amending Act, however the Government has advised that any pending applications for OBUs will not be approved.
The Government has committed to consult with industry on alternative measures to support them and ensure activity remains in Australia once the two-year grandfathering period ends.
The ”Australia as a Financial and Technology Centre Advisory Group” (AFTCAG) report, commissioned by Senator Andrew Bragg and in which EY was an active participant, has recommended for example the establishment of an Incremental Business Activity Rate (IBAR) regime offering tax rebates for up to seven years to companies establishing a “Qualifying Business” in Australia, as a more targeted concessional tax regime for the financial services industry.”
For additional information with respect to this Alert, please contact the following:
Ernst & Young (Australia), Financial Services Tax, Sydney
Ernst & Young LLP (United States), Australian Tax Desk, New York
Ernst & Young LLP (United Kingdom), Australian Tax Desk, London