- Australia has been and will continue to be a substantial net importer of capital
"[Australia]â€¦ has significant endowments of natural resources that cannot be fully utilised without foreign investment. Ongoing access to foreign funding has enabled Australia to sustain higher growth than it otherwise could. Financial System Inquiry December 2013."
"The Australian economy has been a net recipient of capital inflows from the rest of the world for almost all of its historyâ€¦â€ť Reserve Bank of Australia- 20 May 2014. "
- The implications of this are that inward investment into Australia will have a greater regulatory focus and significance, than outward investment.
- This implication may also be responsible for the fact that Australians investing abroad is not a focus area, for tax incentives, or other incentives generally. The "system" discourages this in many cases.
- Inward investment usually has as its sub focus transfer pricing, royalties and other measures which reduce the amount of tax paid in Australia. This explains why Australia readily adopts BEPS and other OECD measures to increase taxes collected from foreigners investing in Australia. It is also difficult to target foreign multi-nationals operating in Australia given the political landscape and the relatively small size of the market due to the small population.
- On the other hand, outward investment is problematic for the reasons stated above and subject to high taxes relative to other countries. This may explain why there is a "brain drain" and relatively few Australian companies have successfully expanding globally, from Australia. From those that have, the largest of which have used dual listings in another major global stock exchange.
In either case, it is important to plan thoroughly, before inward and outward investment are made.
Contact Jaswinder (Jas) Sekhon, the global head of our tax practice for a no obligation discussion.