Vanguard head welcomes tax move

Jeremy Duffield

The reduction of the withholding tax rate on distributions from managed investment trusts to foreign-resident investors stands to benefit all managed funds, according to Vanguard managing director Jeremy Duffield.

He said the “entire managed funds sector” will benefit from a cut in the tax rate from 30 per cent to 7.5 per cent over three years, as announced in the Federal Budget to promote the export of Australian financial services.

“It’s a positive move overall for all managed funds — and not only LPTs [listed property trusts], as had been widely reported — because our funds will now be quite competitive with many other nations.

He said this is because the reduction, which is double that anticipated by industry before Budget night, applies to the “rate of taxation on Australian sourced income from sources other than dividends and interest”.

"This basically means profits on the sale of bonds, domestically sourced hedging gains and rental income will also get the withholding tax rate cut for overseas investors.

“Any reduction in the tax on those items is effectively going to benefit all managed funds, including LPTs, essentially making these funds more attractive to overseas investors.”

In turn, this will “attract greater capital inflows to the local managed funds sector, providing a stimulus to Australia’s credentials as a regional investment centre”, he said.