The new Australian government led by Tony Abbott will not go ahead with the scheduled 1 October starting date for reforms for the country’s Offshore Banking Unit (OBU) regime, fearing the new system could have negative consequences on business, Tax-News.com reported.
“This step is necessary in order to give business the certainty that it needs to comply with the tax laws. Consultation on this measure has indicated that the reforms as announced could affect commercial transactions that should still be eligible for offshore banking unit treatment,” Arthur Sinodinos, assistant treasurer, was quoted by the news service as saying.
The changes were first unveiled by the now ex-Treasurer Wayne Swan, in his 2013-14 Budget. Swan had intended that they be implemented on 1 July, but the date was postponed after concerns were raised during an initial consultation period.
The OBU regime provides a concessional 10 per cent tax rate to encourage legitimate offshore banking activity in Australia. Set up in 1987 and originally applicable to banks and foreign exchange dealers, it has since been expanded to include insurance companies, fund managers and other companies deemed to be OBUs.
However, as countries around the world have turned up the heat on offshore jurisdictions in their hunt for revenues, the OBU has also come under the spotlight. The former Labor Government thought the OBU was being used to transfer domestic banking activities and non-banking profits into OBUs. The news service said the previous government’s proposals would have seen dealings with related parties, including the transfer of transactions between the OBU and the domestic bank, treated as ineligible for OBU treatment. Transactions between OBUs, including those between unrelated OBUs, would have fallen into the same category.