Australia will implement the final element of an investment regime that aims to attract investment from foreign asset managers by excluding their Australian gains and losses from tax.

The exemption will be restricted to foreign managed funds domiciled in countries recognised by Australia as engaging in effective exchange of information, says the office of Bill Shorten, Minister for Financial Services and Superannuation.

“Tax havens need not apply,” says Shorten in a statement. The new scheme will be backdated to be effective July 1, 2011.

Of the $1.8 trillion in assets under management in Australia, about $61 billion comes from outside Australia.

The exemption will not apply to withholding tax that is currently payable on the income. It will also not cover income or gains from an interest, other than a portfolio interest in a publicly traded company, in taxable Australian property.

Martin Codina, director of policy at the Financial Services Council, says the changes puts Australia on a par with offshore financial centres that direct investments into Australian funds.

“For the first time foreign investors will have absolute clarity on their tax position when investing in or through Australian-based funds,” says Codina.