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Australia: Discussions of possible repeal of “offshore banking unit” regime

Australia: Possible repeal of “offshore banking unit”

Changes to Australia’s offshore banking unit regime are expected to be announced by Treasury, and there are some indications that the regime may even be repealed.

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Currently, the offshore banking unit regime provides a concessional tax rate of 10% and an interest withholding tax exemption for “offshore banking” activities that generally involve “offshore persons” (for instance, non-residents, foreign branches or other offshore banking units).

In October 2018, the Organisation for Economic Cooperation and Development’s (OECD) Forum on Harmful Tax Practices (FHTP) raised concerns regarding the offshore banking unit regime’s concessional tax rate and its “ring-fenced” nature (that is, essentially, its limited access to domestic markets). Treasury has been in ongoing dialogue with the FHTP and a recommendation is with the Treasurer for approval. It appears that a likely outcome would be repeal of the offshore banking unit regime, possibly as early as the end of 2020 (after consultation). In the meantime, there are reports that the Australian Taxation Office (ATO) has been reluctant to process new offshore banking unit registrations.


Read a September 2019 report prepared by the KPMG member firm in Australia

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