OBU amendments make it into law
A tax law amendment passed in the Senate last week limits the availability of the Offshore Banking Unit concession in circumstances where it could otherwise be used to convert an ineligible activity into an eligible OB activity.
Tax and Superannuation Laws Amendment (2015 Measures No.1) Bill 2015 also brings the list of eligible OB activities up to date. The list had not been revised since 1998.
The changes also aim to provide greater clarity by codifying the OBU principles and changing the method for allocating expenses.
The range of eligible trading activities will exclude trading in subsidiaries or other entities where the OBU holds an interest of ten per cent or more. It will also exclude trading in interests that are not “held for trading” according to the OBU’s accounting records.
The OBU regime was put in place in 1986 to encourage offshore financial transactions between non-residents to be conducted through an Australian institution. OBU activity is subject to a concessional tax rate of ten per cent.
The operation of the scheme has been hampered by government concerns, on the one hand, that financial institutions have exploited loopholes in the rules and industry concerns, and on the other, that there was too much uncertainty about the application of the rules.
