On 7 March 2012, the Government released a second exposure draft legislation in relation to the Investor Manager Regime (IMR). The draft legislation deals specifically with the first two elements of the IMR previously announced, namely, the Fin 48 Exemption and the Interim IMR.
Amendments under the draft legislation are intended to directly affect IMR foreign funds and non-resident investors by providing certainty surrounding the US standard, Fin 48, and preventing Australian taxation for those foreign funds deemed to have a Permanent Establishment (PE) where they engage Australian based intermediaries.
The Fin 48 Exemption
The proposed Fin 48 Exemption applies to exempt all income, gains or losses from portfolio investments (interests less than 10%) and eligible financial arrangements to the foreign fund and its non-resident investors. This Exemption is proposed to apply to the 2010-2011 income year and prior years.
The Interim IMR
The Interim IMR is intended to ensure widely-held foreign resident funds are not subject to Australian taxation where the fund is taken to have an Australian PE by virtue of the fact that it engages the services of an Australian based intermediary. The Interim IMR is proposed to apply to the 2010-2011 income year and future years.
The Government will be accepting public comments on the draft legislation until 4 April 2012.