NO.028

PROPOSED AMENDMENTS TO THE FINANCIAL CORPORATIONS (TRANSFER OF ASSETS AND

LIABILITIES) ACT 1993

The Government has decided to amend the Financial Corporations (Transfer of Assets

and Liabilities) Act 1993 (the Act) to extend the deadline for foreign banks to obtain

a banking authority until 30 June 2000 in order to be eligible for concessional

tax treatment when transferring assets and liabilities. The existing deadline expired on

22 December 1998.

The legislation flowed from the decision to relax the policy prohibition on foreign

banks establishing branch operations in Australia in 1992. Amendments were made to the Banking

Act 1959 in 1992 to that effect.

The Act was designed to facilitate the establishment of branch operations in Australia

by enabling Federal and State taxes, fees and charges to be waived for the transfer of

assets and liabilities (including tax losses) from foreign bank subsidiaries, that existed

prior to 18 June 1993, to foreign bank branches. It was designed to ensure that

existing foreign bank subsidiaries that wished to convert to a branch structure would not

be disadvantaged compared to new foreign bank branch entrants.

A temporary extension to the deadline contained in the Act will provide foreign banks

with additional time to decide on the future structure of their operations given the

Government’s tax reform package. The amendment is proposed to apply from

22 December 1998.

The Act is not applicable where there has been a change of ownership of the foreign

bank subsidiary since 18 June 1993, as the extent of consolidation in the

financial sector internationally and in Australia was not envisaged when the Act was

originally drafted. Consequently, the Act will be amended to apply to foreign bank

subsidiaries that existed prior to 18 June 1993 but have changed ownership since.

The proposed amendments are consistent with promoting Australia as a global financial

centre.

The cost to revenue is likely to be minimal as most of these transfers would not occur

without the tax concessions available in the Act.

Legislation to effect these proposed changes is expected to be introduced to Parliament

in the 1999 Winter sitting. I have written today to the State and Territories seeking

their support for these proposed amendments.

CANBERRA ACT

25 May 1999

Contact: Ruth Gabbitas

Treasury

(02) 6263 2895