The Budget contained little detail and consultation with industry is taking place, during which the government has announced that the changes will be deferred until 1 October 2013, however there will be no grandfathering of existing transactions.
Treasury has indicated that the changes are intended to address particular integrity concerns. However, there is a substantial concern that the proposals will go further than necessary and could drive some financial services activities offshore. For example, the exclusion of activities between OBUs would prevent an OBU from depositing surplus cash with the OBU of another bank, a common activity, potentially leading to cash being deposited in an offshore bank account.
Industry feedback to Treasury has stressed that a general ban on related party dealings is too restrictive and unnecessary to mitigate integrity concerns. For instance, this could have significant implications for funds management OBUs undertaking investment activities where a fund manager is related to the fund vehicle.
With the start date for the changes so close, there is limited time for government to determine its position. An announcement is expected before the government enters caretaker mode. Affected groups will need to be ready to move quickly to assess the impact of any announcement and implement necessary systems changes from 1 October 2013.