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Interest Withholding Tax ChangesAbolition of Interest Withholding Tax
Release date:20 May 2008 New South Wales Treasury Corporation (TCORP) welcomes abolition of Interest Withholding Tax (IWT) for domestically issued Semi-Government Bonds. TCorp welcomes the Australian Federal Government’s decision on 20 May 2008 to abolish IWT on domestically issued Semi-Government bonds. This decision will allow TCorp to further enhance the liquidity of its Benchmark bond programme which provides a high degree of liquidity and price transparency for investors. Concentrating new issuance of Benchmark bonds into the existing Domestic series will enable TCorp greater flexibility in meeting the changing investor dynamics, particularly for those investors who were previously constrained from investing in domestically issued bonds. The change will also broaden the potential investor base for the existing Capital Indexed bond programme which has not been offered to investors as an Exchangeable bond. Once the abolition of IWT is enacted as law, TCorp’s approach to the two programmes will be as follows: The Exchangeable Bond Programme will continue to be maintained so that where required, existing investors can retain their holdings until maturity. Investors will continue to benefit from the liquidity of the domestic programme through the current exchange function. Investors will also be able to continue tapping new issuance of Exchangeables at existing margins to the Domestic benchmark curve, although we expect this to significantly diminish over time. To encourage the further development of the liquidity of the Domestic Benchmark program TCorp will offer existing Exchangeable bond investors a 1 basis point incentive to switch their holdings for the Domestic Benchmark bond of the same maturity. This offer will remain open from the date of the formal abolition of IWT until 31 December 2008. Outstandings (face value) of TCorp’s Benchmark bond programme as at 19 May is as follows:
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