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Removing the Preferential Tax Treatment for Offshore Banking Units

On 12 March 2021, then Treasurer, the Hon Josh Frydenberg MP, announced that the Government would introduce legislation to remove the preferential tax treatment for offshore banking units and close the regime to new entrants.

This announcement was made in response to concerns raised by the OECD’s Forum on Harmful Tax Practices (FHTP) in October 2018, relating to the concessional 10 per cent tax rate and ring-fenced nature of the regime.

A regulation impact statement (RIS) was not completed in 2021 as the then Prime Minister granted an exemption from the requirement to complete a RIS. The Australian Government’s regulatory impact analysis requirements stipulate that, under these circumstances, a post-implementation review is to be completed within two years of the relevant legislation being enacted (which occurred in September 2021).

The post-implementation review concludes that the regulation met its stated objective in addressing concerns that the offshore banking unit regime did not comply with international expectations developed through the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, protecting Australia from reputational damage and possible sanctions by the European Union or its members. 

Assessment comments
Since 1 July 2023, responsibility for Australian Government evaluation processes rests with the Australian Centre for Evaluation. As such, this PIR has been assessed and found adequate by the Australian Centre for Evaluation. As per the Government’s Impact Analysis requirements, publication is required on the Department of the Prime Minister and Cabinet’s website. 

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Removing the Preferential Tax Treatment for Offshore Banking Units