Legislation that will offer tax breaks to foreign investment in Australia is set to grow the $1.8 trillion industry, according to Assistant Treasurer and Financial Services Minister, Bill Shorten.


The legislation will move Australia’s taxation of foreign managed funds more into line with broadly accepted international practices as the Federal Government rolls out the Investment Manager Regime.


"Australia's taxation of foreign managed funds is not consistent with other financial centres, including the US, the UK, Hong Kong and Singapore. These new measures will help Australia retain $57 billion already invested here by foreign managed funds,” Mr Shorten said.


The amendments to income tax law will clarify how certain income of foreign funds, for 2010-11 and prior income years, are taxed. It will also clarify the treatment of certain investments of foreign funds, where the returns or gains are treated as being attributable to a permanent establishment in Australia.


As part of the 2011/12 Budget, the government asked the Board of Taxation to bring forward its review of the full funds management Investment Management Regime. The Board of Taxation will now report to the Government by 30 September 2011 in relation to this issue.


The exposure draft legislation and explanatory memorandum is available on the Treasury website. Consultation closes 30 August 2011.