Income tax: Offshore Banking Units (OBU) - if an OBU acts as funds manager for a trust with offshore investors and an Australian trustee, does the funds management role fall within the definition of an investment activity under subsection 121D(6)?

Yes. Subsection 121D(6) of the Income Tax Assessment Act 1936 defines an investment activity as 'making, as broker or agent for, or trustee for the benefit of, an offshore person ... an investment with an offshore person ... or so making and managing such an investment ...'

The supplementary explanatory memorandum to Taxation Laws Amendment Bill (No.) 4 1992 stated that the proposed investment activity provision as introduced to Parliament was to be amended 'to make it clear that an OBU is acting in the capacity of a broker, agent or trustee in making or managing an investment for the benefit of an offshore person and not on its own behalf.'

It is, therefore, immaterial whether the trust has an Australian trustee, as long as the other requirements of the subsection are complied with.