Global Tax Alert | 26 September 2013

Asia Region Funds Passport Pilot; opportunities for Australian asset managers and diversification

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On 20 September 2013, Australia signed a joint Statement of Intent with Korea, Singapore and New Zealand to develop an ”Asia Region Funds Passport” (the passport), to provide a multilaterally agreed regulatory framework to enable the cross-border issue of funds products between participating countries. The passport is planned to be ready for pilot offers in 2016.

The Statement of Intent, signed at the 2013 Asia-Pacific Economic Cooperation (APEC) Finance Ministers Meeting in Indonesia, is available on APEC’s website.

It is expected that Australian investment fund managers and other financial services providers will be interested in the potential benefits which access to the passport will provide to investors from Asia, who may benefit also from the Australian Managed Investment Trust withholding tax concessions for payments to nonresidents. It will also compliment the Australian Investor Manager Regime exemption proposals for certain income of widely held foreign funds and their investors.

However it will still be important for managers and others to consider the impact of the various Australian tax rules and other concessions in the structuring of fund offerings.

As well, the passport will simplify marketing in Australia of funds products regulated by other passport countries.

The passport will allow collective investment products offered in one of the passport countries to be sold to investors in another economy, provided that they comply with an agreed set of regulations. It is intended that passport members will recognize each other’s regulation of collective investment vehicles to the fullest extent possible with special rules to be developed to apply in some areas.

The cross border distribution of managed fund products across the Asia region is expected to result in benefits for both consumers and for the Asia region from increased investment and in particular from the potential for raising capital for infrastructure investment.

The passport is seen as an important development for Australia to compete as a regional financial services center, allowing Australian funds managers to compete with European funds for the pool of investment funds in Asia, which already operate under mutual recognition rules.

A pilot for the passport is scheduled to commence in 2016 following public consultation and development of the rules. However the Australian Treasurer has indicated that he would like the passport to commence earlier than this.

It is intended to extend the passport to other countries in the region over time.

It will be important for funds managers and other service providers to engage in the process for the development of the rules.

There will be public consultation during January to June 2014 on the detailed rules needed to implement the passport, based on a framework document included with the Statement of Intent.

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Australia), Adelaide
  • Sean van der Linden
    + 61 8 8417 1688
    sean.van.der.linden@au.ey.com
Ernst & Young (Australia), Brisbane
  • Michael Hennessey
    +61 7 3243 3691
    michael.hennessy@au.ey.com
Ernst & Young (Australia), Melbourne
  • Dale Judd
    +61 3 9655 2769
    dale.judd@au.ey.com
Ernst & Young (Australia), Perth
  • Grant Burgess
    +61 8 9429 2298
    grant.burgess@au.ey.com
Ernst & Young (Australia), Sydney
  • Antoinette Elias
    +61 2 8295 6251
    antoinette.elias@au.ey.com
Ernst & Young LLP, Australian Tax Desk, New York
  • Michael Anderson
    +1 212 773 5280
    michael.anderson@ey.com

EYG no. CM3827