27/10/23

AUSTRALIA: Regulation leaves Australia trailing Singapore as investment hub

As published on: proactiveinvestors.co.uk, Thursday 27 October, 2023.

The Australian government faces mounting pressure to expedite regulatory and tax reforms in order to bolster its position as an attractive investment destination.

The Financial Services Council (FSC) in collaboration with KPMG has today released the State of the Funds Management Industry report, highlighting regulatory and tax hurdles that impede Australia's funds management sector from becoming a global financial powerhouse

The FSC, in collaboration with tax consultancy firm KPMG, has underscored the need for clarity in policy settings and tax obligations to stimulate interest among fund managers to embrace the new Corporate Collective Investment Vehicle (CCIV) structure.

The CCIV, established in July 2022 under the Corporations Act, was conceived to provide Asian-investor-friendly collective investment schemes structured as companies, with the aim of positioning Australia as a competitive investment hub akin to Singapore or Hong Kong.

Reform needed to attract foreign capital
FSC CEO Blake Briggs emphasised Australia's world-class fund managers, competitive fees, and bipartisan support, which could be harnessed to attract foreign capital. However, he expressed concern about the sluggish pace of progress in this regard.

Briggs called upon the government to establish a transition mechanism for existing trust-structured investment funds to migrate to the CCIV structure, offering much-needed clarity to fund managers regarding tax and administrative obligations during the transition.

Australia's aspirations to become a significant exporter of fund management services have fallen short, with Singapore outpacing it due to regulatory inertia.

While Australia has laid the groundwork over the past decade, Singapore established an equivalent regime in just 18 months, amassing 660 registrations, 1300 sub-funds, and 420 fund managers.

A KPMG report commissioned by the FSC revealed that only 6.5% of Australia's $4.3 trillion in funds under management is managed for overseas investors, compared to 78% in Singapore and 90% in Ireland. This trend reflects Asian investors' preference for jurisdictions with greater tax certainty.

Among their recommendations, KPMG and the FSC advocate for a uniform 5% withholding tax rate on all income payments to offshore investors in CCIV structured funds.

Such reforms are seen as pivotal to enhancing the appeal of these vehicles to foreign investors and, consequently, benefiting the Australian economy and its sizable financial services workforce, which comprises up to 560,000 individuals.

Australia possesses the potential to be a formidable player in the global investment landscape, but swift action on regulatory and tax reforms is imperative to close the gap with leading competitors like Singapore.

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Australia Singapore