Focus on: Australia
As a gateway to the Asia Pacific and with a strong, stable economy, Australia provides excellent, tax efficient investment opportunities for overseas investors.
Australia has a large, diversified economy with 25 years of uninterrupted economic growth. This is unparalleled in the OECD and future economic prospects remain bright. The country is well placed to participate in the growth of the Asia Pacific region through trade, education and other links. Australia is increasingly experiencing investment inflows from China and other key trading partners in its real estate, equity and agricultural markets.
The country’s economy is AAA rated by all three global rating agencies and is forecast to realise average annual real GDP growth of 2.9% per annum between 2016 and 2020.
Strong regulatory environment
Strong government regulation has helped Australia’s financial system to be among the most stable in the world during the past decade. The country ranks very highly on all measures of corporate accountability, legal systems, low corruption, individual rights, and private ownership.
All of this points to a very safe, low risk environment in which to invest and do business.
Favourable taxation for non-residents
- Most income and capital gains from listed shares and managed funds are tax-free or concessionally taxed for non-residents of Australia.
- Franked dividends, where there is a tax credit attached to the dividend payment, are tax-free to non- residents. Unfranked dividends are generally subject to withholding tax of 15% and interest income is generally subject to withholding tax of 10%.
- Foreign income (for example, managed funds invested in international equities, property, etc.) is tax-free
- Capital gains on these investments are generally tax-free.
- Of course, taxation applicable in the investor’s country of residence must be factored in and may be affected by double tax agreements.
- Assets can be held in the name of the investor or in an Australian resident structure.
- Discretionary trusts, in particular, can be effective in maximising flexibility regarding income and capital distributions for asset protection purposes, while still maintaining the above favourable tax treatment.
Companies listed on the Australian stock exchange have traditionally had a high dividend payout in comparison to many other overseas markets – some blue chips are currently paying 6% or more per annum. This dividend yield further supports share prices and suits investors who require the security of income.
Australia has a highly sophisticated financial services sector. Investors can easily access a wide range of direct shares, managed funds and structured products with deep liquidity, transparent reporting and smooth transaction capabilities. The fund management sector is a world leader both in its sophistication and size. It is ranked one of the largest in the world with over $AUD2.6 trillion invested.
Recent Australian Bureau of Statistics figures indicate that there are more than 5,600 managed funds in Australia. It is important to ensure that proper (independent) research is used to select high quality funds to invest in.
From an exchange rate perspective, the current entry point for some foreign investors is favourable with the Australian dollar falling from parity or above with the US dollar in early 2014 to the current trading range in the mid-70s.
A final consideration is that interest rates in Australia are still higher than many other mature economies with bank deposits and government bond yields still positive on a real and nominal basis. For instance, bank and term deposit rates of more than 3% per annum are available.
For more information, contact:
Nexia Melbourne, Australia
T: +61 3 8613 8815