Australia’s Offshore Banking Unit (OBU) regime, introduced in 1987, aimed to boost Australia’s international competitiveness in financial services by offering tax incentives. It included interest withholding tax exemptions and a 10% concessional tax rate on offshore activities. 

Over time, eligibility expanded, but in October 2018, the Organisation for Economic Cooperation and Development’s (OECD) Forum on Harmful Tax Practices (FHTP) determined the OBU to be a harmful preferential tax regime. This could have led to reputational damage for Australia and the possibility of significant adverse impacts on Australia’s securitisation market, with flow-on impacts to everyday Australians. 

This Post-Implementation Review (PIR) assesses whether the Treasury Laws Amendment (2021 Measures No. 2) Act 2021 which removed the preferential tax treatment for Offshore Banking Units is achieving its intended goals effectively and efficiently. A PIR outlines the original issue, evaluates actual impacts, includes stakeholder input, and concludes on the policy’s appropriateness and performance.

This PIR found that the 2021 reforms: 

• addressed OECD concerns, leading to Australia’s removal from the EU’s grey list and avoiding potential sanctions and their consequent impact on Australia’s securitisation market
• reinforced Australia’s commitment to contribute to maintaining the integrity of the international tax system
• have not led to significant relocation (to jurisdictions with lower effective tax rates) of OBU operations
• did not significantly increase regulatory and compliance costs over time
• delivered net benefits to the Australian community.