Australia

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KEY COUNTRY FACTS
Flag of Australia
System of government: constitutional monarchy
Population: 22.51 million (2014 est)
Currency: Australian dollar (AUD)
FX regime: free float
GDP: US$1,497bn (2013 est)
IGTA member: yes
FATF member: yes
Treasury association: Finance and Treasury Association
Other professional financial/banking associations: Australian Bankers' Association


Financial regulatory framework

Bank supervision

The financial services sector is supervised by the Australian Prudential Regulatory Authority (APRA). It oversees banks, building societies, credit unions and the insurance sector and is funded largely by the industries that it supervises. The Reserve Bank of Australia (RBA) has responsibility for monetary policy and works to maintain a strong financial system and financial stability.

Exchange controls

None.

Foreign investment

Proposals by foreign entities to make direct investments in Australia are examined by the Foreign Investment Review Board (FIRB), which makes recommendations to the treasurer.

Taxation framework

  • Corporate income tax - the corporate income tax rate is 30%. Resident companies are taxed on their worldwide income and non-resident companies on their Australian source income.
  • Capital gains - generally taxed as income.
  • Taxation of dividends - there is an imputation system of taxation of dividends. However, if dividends paid to a non-resident are non-franked, a withholding tax of 30% is levied subject to double tax treaties, which generally reduce this to 15%.
  • Taxation of interest - interest paid to a non-resident is subject to 10% withholding tax (subject to tax treaties).
  • Thin capitalisation - the thin capitalisation rules may limit the deduction for interest. There is an arm's length debt test and under the safe harbour test the maximum allowable debt is based on a 3:1 ratio.
  • Transfer pricing - transfer pricing rules are based on OECD guidelines.
  • Indirect taxes - the Goods and Services Tax (GST) is levied at a single rate of 10% on a broad range of goods and services.

Accounting framework

Since 2005, companies have been required by the Australian Accounting Standards Board (AASB) to adopt International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) to their consolidated financial reporting statements.

Banking service provision

Banks operating in Australia offer a wide range of services including traditional corporate banking services, fund management, insurance, personal financial services and financial advice. These services can be accessed through multiple distribution channels, including electronic. Although the banking sector is highly competitive, Australian banks are amongst the most profitable in the world. There are 73 authorised banks of which 48 are foreign-owned and 25 domestic. The major banks are Commonwealth Bank of Australia, Westpac Banking Corporation, Australia and New Zealand Banking Group Limited, and National Australia Bank Limited, which together account for more than two thirds of total assets of the banking sector. The major Australian banks are AA-rated.

Clearing and payment systems

Regulations, procedures and standards governing payments clearing and settlement are set and managed by the Australian Payments Clearing Association (APCA). APCA is a company limited by guarantee and is owned by banks, building societies and credit unions. The Australian Payments Council is a new organisation established to develop the strategic development of the Australian payments system.

Clearing systems

  • Australian Payments Clearing Association (APCA) is the primary vehicle for payments industry collaboration with a mandate to improve the safety, reliability, equity, convenience and efficiency of the Australian payments system. APCA's role is to manage and develop regulations, procedures, policies and standards governing payments clearing and settlement within Australia. It currently administers five payments clearing systems – covering cheques, direct debit and credit payments, ATM and aspects of EFTPOS transactions, high value payments and bulk cash – and the COIN Infrastructure System (part of the Common Payments Network).
  • Australian Paper Clearing System (APCS) or Clearing System 1 (CS1) covers the exchange and settlement of cheques, payments orders and other paper-based payment instructions.
  • Bulk Electronic Clearing System (BECS) or Clearing System 2 (CS2) covers the exchange and settlement of direct entry (direct debit and credit) transactions.
  • Issuers and Acquirers Community (IAC) was launched in July 2015 as a replacement for the Consumer Electronic Clearing System (CECS) IAC covers the interchange and settlement of proprietary card-based ATM and aspects of EFTPOS transactions. Providers of credit cards (Visa and MasterCard) have set their own rules for participation in their respective schemes, and eftpos Payments Australia Limited (ePAL) sets scheme rules for domestic debit. IAC will operate in parallel to the CECS until the beginning of 2016.
  • High Value Clearing System (HVCS) or Clearing System 4 (CS4) payments are made through Australia's Real Time Gross Settlement (RTGS) system – RITS (Reserve Bank Information and Transfer System). Participating members exchange payments using the SWIFT Payment Delivery System (PDS), based on the SWIFT FIN-Copy product.
  • Australia Cash Distribution and Exchange System (ACDES) or Clearing System 5 (CS5) covers the exchange and distribution of wholesale cash (notes and coins).
  • The Common Payments Network comprises APCA's Community of Interest Network (COIN), SWIFT's FileAct Service and the Reserve Bank of Australia's (RBA) Clearing Interconnector. The COIN is an IP-based virtual private network for secure transmission of payment files and messages between payments participants. The RBA established the clearing interconnector service to enable transmission of payments files and messages between participants on different networks. The initial use of the interconnector is to manage interchanges between COIN participants and SWIFT users, so that payments system participants can, if they choose, use SWIFT for connectivity as an alternative to the COIN.

Main payment types

Cash is probably the most important instrument for small-retail transactions and for transfers of value between individuals. Anecdotal evidence and experience suggest that cash transactions account for the dominant share of the number of transactions, but a very small share of their value. Non-cash payments account for most of the value of payments in the Australian economy. On average, non-cash payments worth around AUD218bn are made each business day, equivalent to about 15% of GDP. About 70% of the value of non-cash transactions is accounted for by a small number of high-value payments made through Australia's RTGS system. Most of the value of these payments relates to the settlement of foreign exchange and securities markets transactions. The migration of large business payments to the RTGS system has meant a decline in the importance of the cheque as a payment instrument. Fewer than 1 million cheques are written each business day and they account for less than 5% of the value of non-cash payments. The use of electronic payment instruments at the retail level has been growing rapidly. About 19 million card transactions are made every day. For many years, Australian governments and businesses have made extensive use of direct entry credits for social security and salary payments. On the other hand, there has been a traditional reluctance on the part of consumers to use direct debits for bill payments. This appears to be disappearing with direct debit payments growing strongly in recent years. There are now about 10 million direct entry payments each day, accounting for about 35% of the value of non-cash payments.

Cash and bank account management

Account availability

Accounts in domestic and foreign currency are freely available.

Money laundering

Australia was a founding member of FATF, and played a role in the drafting of FATF's recommendations. The Australian government updated its legislation in 2006 (Anti-Money Laundering and Counter-Terrorism Financing Act 2006). The Australian Transaction Reports and Analysis Centre (AUSTRAC) is Australia's anti-money laundering and counter-terrorism financing regulator and specialist financial intelligence unit. As Australia's financial intelligence unit, AUSTRAC contributes to investigative and law enforcement work to combat financial crime and prosecute criminals in Australia and overseas.

Cash concentration and pooling

Domestic notional cash pooling and cash concentration are available. Cross border cash concentration is also available.

Electronic and internet banking

Both electronic and internet banking are very well developed and available from all major banks.

Liquidity management

Short-term investment

Banks offer interest-earning accounts and the ability to move surplus funds into high earning accounts overnight. Other options for short-term investment include deposit accounts in a range of currencies and in maturities from seven days to two years, and negotiable instruments such as bank accepted bills, CDs, government securities and commercial paper.

Short-term borrowing

Short-term borrowing options include bank overdrafts and bank loans, promissory notes and commercial paper. Structured Capital Markets finance options are also available for major corporates and financial institutions in Australia.

Corporate finance

Australia has large and sophisticated financing markets. The Australian Securities Exchange (ASX) is the primary stock exchange in Australia for equities, derivatives and fixed interest securities. The resources and financial sectors make up a relatively high proportion of the market, and comparatively few manufacturing stocks are listed. ASX is regulated by the Australian Securities and Investments Commission (ASIC). The ASX is one of the world's top-10 listed exchange groups measured by market capitalisation.

Websites

Government

Department of Treasury

Reserve Bank of Australia

Australian Prudential Regulatory Authority (APRA)

Australian Taxation Office

Australian Transaction Reports and Analysis Centre (AUSTRAC)

Foreign Investment Review Board (FIRB)

Australian Bureau of Statistics

The Australian Payments Clearing Association (APCA)

Australian Accounting Standards Board

Australian Securities Exchange

Australian Bankers' Association