The Minister for Human Services, Financial Services, Superannuation and Corporate Law, Chris Bowen MP,¹ released the Government’s response to the report from Australian Financial Centre Forum (AFCF) – ‘Australia as a Financial Centre, Building on our Strengths’²  (‘Johnson Report’).

Tony Burke, Acting Chief Executive of the ABA, said: “The report addressed the broad priorities identified by the banking and finance industry in taxation, regulation, human capital and market access, and the Government has provided in-principle or direct support for nearly all 19 recommendations.”

“This demonstrates the Government’s continuing commitment to enhancing Australia as a financial services centre – the Government’s response is a first good step to addressing some of the market and regulatory barriers to building Australia as a regional leader in financial services.”

The ABA supported the Johnson Report’s recommendations, and welcomes the Government’s response, for example, in relation to those on reform of interest withholding tax, the offshore banking unit regime and the corporate bond market. (See Notes for Editors below)

Mr Burke said “The Budget announcement on a phase-down of interest withholding tax is good development, although we think there is opportunity to broaden the approach, and we look forward to consultation on improving the effectiveness of the offshore banking unit regime.”

“The announcement on providing a tax incentive for retail investors to diversify their investments into bonds and other interest-bearing investments is also a good development.”

“We think that it is likely that further action will be needed to address regulatory burden and compliance costs, but important steps have been taken to address market and regulatory barriers to the rebuilding of a retail corporate bond market in Australia.”

The ABA has worked with the Government to maintain the momentum of the AFCF project, and welcomes the establishment of the Financial Centre Taskforce.

Mr Burke said "The Taskforce can now engage with industry on the detail of the Report’s recommendations and the Government’s response. The ABA and its member banks look forward to providing comment and input to Taskforce activities and projects.”

Notes for editors:

• An offshore banking unit is a financial institution carrying out offshore trades. Offshore banking enables an institution to engage in banking and foreign-exchange activities free of the regulations of the host country, and many offshore banking centres offer tax concessions to foreign companies operating within their borders as a way of attracting lucrative foreign-exchange business.
• Australia's taxation regime has been historically unfavourable to the operation of offshore banking business.
• Relaxing some tax provisions would be an attempt to make Australia a more competitive international financial centre.