AUSTRALIA – A REGIONAL FINANCIAL CENTRE MEASURES

I am announcing two amendments to the measures contained in Taxation Laws Amendment

Bill (No. 5) 1998 which will further enhance Australia as a regional financial centre.

Those measures relate to the proposed widening of the interest withholding tax exemption

under section 128F of the Income Tax Assessment Act as announced by the Government on

8 December 1997 in the ‘Australia – A Regional Financial Centre’

component of the Government’s Investing for Growth Statement.

The first amendment is to allow bearer debentures or interests in bearer debentures to

be issued to Australian residents and still attract the interest withholding tax exemption

under section 128F. This will further integrate the domestic and offshore corporate debt

markets by allowing companies to offer bearer debentures simultaneously to investors in

Australia and overseas.

The second amendment is that an Australian company acting in the capacity of trustee

for an Australian trust will be treated as a company for the purposes of section 128F,

provided the trust is not a charitable trust and that the beneficiaries of the trust are

companies for the purposes of 128F but not including trustee companies. This amendment

will allow financial institutions involved in securitisation transactions to more easily

access the section 128F interest withholding tax exemption. It will increase competitive

pressures in lending for home buyers and consumers by allowing lenders to access the

cheapest funds free of withholding tax.

Both amendments will apply to debentures issued after 2 July 1998 – the date of

effect of the section 128F interest withholding tax measures included in Taxation

Laws Amendment Bill (No. 5) 1998.

These amendments will further encourage the development of the domestic corporate debt

market and are in line with the Government’s objectives of enhancing Australia’s

attractiveness as a financial centre in our region.

CANBERRA

13 August 1998

Contact:

David Walker

Australian Taxation Office

(02) 6216 2221