Govt seeks tax exemption for sovereign investments

The Federal Government has released an options paper proposing changes to income tax law to attract foreign investment.

The Options to codify the tax treatment of sovereign investments paper released yesterday stated that amendments would result in a tax exemption for certain income earned by foreign governments and their sovereign funds. Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, noted that funds from foreign government investment bodies currently make up about $65 billion.

“By exempting those investments that are generally of a passive nature from income tax, which is standard practice around much of the world, as well as reducing compliance costs and increasing certainty, we position Australia as an attractive destination for more sovereign investment in the future,” he said.

By codifying the current tax treatment of sovereign investment, sovereign immunity law would be consistent with the Government’s policy to tax inbound capital in a way that does not deter foreign investment, said Shorten.