Thursday, May 14, 2009

FIF Rules to be Repealed

Apparently, the Australian federal budget announced on Tuesday repeals the Foreign Investment Fund (FIF) rules which apply to investments in foreign domiciled managed funds and stocks. These rules are rather complex but essentially mean that with many exceptions you must pay tax on the annual change in value of your foreign investments whether you actually sold that investment or not. In essence they are all treated as trading assets and you do not have access to the lower rate of capital gains tax applicable to investments held for more than 12 months. These rules don't apply to funds based in Australia that invest in foreign assets.

If they are really repealed that would be very good news. One of the effects would be to advantage investing in Man Financial's managed future products over the alternatives. Man does not distribute income on a regular basis but instead accumulates it within the fund. However, Man funds are FIFs, while the competitors products are not. We'll have to see the exact details to know all of the implications.

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