ISI proposes fix to latest tax hurdle

Tax officials and the savings industry have gone into a huddle over difficulties with the new investment tax law – including the question of which Australian companies will be exempt form offshore tax.

Friday, March 2nd 2007, 6:10AM

by Rob Hosking

As Good Returns reported last Friday, the investment tax changes finalised last year allowed direct investments into Australian companies to be treated under the same tax rules as into New Zealand listed companies – that is, they would not have to pay the “fair dividend rate” of 5% other offshore investments are subject to.

The difficulty is in defining which Australian companies come under this rule and which do not.

The Investment Savings and Insurance Association is suggesting the Inland Revenue and Australian Tax Office officials prepare an approved list each year. Officials, are, however, understood to be less than enthused about that idea.

Simply using the ASX 200 would not work, says ISI chief executive Vance Arkinstall. Companies such as Newscorp are included on that list but are clearly not domiciled in Australia.

“But the issue for the industry is, how are we to know which companies are Australian firms and which are not? The legislation isn’t clear and it makes a big difference to investment decisions.”

The difficulty is only one problem with the legislation, which was passed in something of a rush late last year, but it is understood to be the biggest problem.

The issues will be addressed in the annual May tax bill, and officials have been told to report to Finance Minister Michael Cullen and Revenue Minister Peter Dunne by the end of next week.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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