Australia to reform withholding tax system
1-May-2008Australia's new Labour government announced, on 1 February 2008, that it is to halve the withholding tax from 30% to 15% on distributions to foreign investors in locally managed funds as of 1 July.
It applies to Australian-source net taxable income of the managed funds, such as rental income, foreign exchange gains, income from financial transactions and capital gains on taxable Australian property. Dividends, royalties, and interest are not included.
The new tax will apply to non-resident trustees and companies and no tax return will have to be filed. But claiming debt as a deduction will be abolished.
According to Bloomberg, Minister for Finance and Deregulation Lindsey Tanner predicted that the cuts may attract as much as AUD13 billion (about US$11 billion) a year to the Australian economy.
The move is designed to make Australia a more competitive investment location and tap into the global managed funds industry. Singapore and Hong Kong have flat, final tax rates of 10% and 15% respectively on such distributions.
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