Last Updated: Sun Oct 17, 2010 00:22 am (KSA) 21:22 pm (GMT)

Australia sees Islamic finance changes in 2011

Australia joins a number of non-Muslim countries looking to develop their Islamic finance sector (File)
Australia joins a number of non-Muslim countries looking to develop their Islamic finance sector (File)

Australia will outline laws in the second half of 2011 to equalize the tax treatment of Islamic finance and conventional banking, a government official said on Thursday.

The comments from Nick Sherry, Australia's assistant treasurer, mark the first time that the government has indicated a timeline for the change.

 I think in the second half of next year we will be able to outline specific legislative change 
Nick Sherry, Australia\\\'s assistant treasurer

Australia joins a growing number of non-Muslim countries, which include Hong Kong, looking to develop their Islamic finance sector by changing regulations to attract investors who can only put their money in sharia-compliant assets.

Islamic financial transactions can be costlier than conventional deals as they often involve multiple sale and purchase transactions, which create a greater tax liability.

"I think in the second half of next year we will be able to outline specific legislative change," Sherry said in an interview.

More countries have been exploring Islamic banking since the global financial crisis and Australia, which is dependent on foreign capital for its growth, is keen to become an Islamic finance centre.

Sherry said the government wanted to develop the industry as a whole, rather than specific areas such as sukuk financing or wealth management products.

"I favor as comprehensive a set of changes as possible in one-go. I don't see (it) as the government's role to target particular areas," Sherry said.

HSBC and Australia's investment bank Macquarie are among those that want to offer sharia-compliant products in Australia, he said.

Islamic finance is derived from the sharia which forbids charging interest and favors profit-sharing arrangements or structures that resemble rental agreements. These transactions are underpinned by physical assets.

Sherry, who recently met bankers and investors in the Middle East, said Islamic finance investors were interested in Australian assets such as ports and railways, property, agriculture and resources.

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