‘Revenge Tax’ Shift Revives US Appeal for Australia Mega Funds

Buildings in Sydney. Photographer: Brent Lewin/Bloomberg Photo by Brent Lewin /Bloomberg

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(Bloomberg) — Australia’s A$4.1 trillion ($2.7 trillion) pension industry signaled relief over US plans to scrap the so-called “revenge tax,” which would have increased levies on income from assets of foreign investors.

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The proposal to lift taxes on US income of non-US businesses could have had a far-reaching impact on Australian pension funds, which have about $450 billion invested in the world’s largest economy across infrastructure, equities, bonds, and other assets, according to industry data.

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“To see it actually not go through, or be significantly watered down, certainly makes it easier for us to invest in long-term US assets,” said Daniel Farmer, chief investment officer of MLC Asset Management. Farmer said the tax impact could have been “potentially quite significant” in some asset classes, including unlisted property and infrastructure. “It sort of reopens up those markets in a much more unencumbered way.”

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Section 899, part of President Donald Trump’s so-called One Big Beautiful Bill, was dubbed the “revenge tax” because it would increase rates only for countries whose tax policies the US deems unfair. That includes Canada, the UK, France and Australia, which impose “digital services taxes” on large technology companies like Meta Platforms Inc.

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The US Treasury Department announced a deal with G-7 allies that will exclude US companies from some taxes imposed by other countries in exchange for removing the Section 899.

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“Investors will still exercise some caution and it’s something we will continue to assess, but it looks like a pretty good outcome from here,” said Andrew Fisher, general manager, total portfolio management and resilience for Australian Retirement Trust, the country’s second-largest pension that manages around A$330 billion.

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Australian Treasurer Jim Chalmers said in a statement Friday he had raised his concerns directly with Treasury Secretary Scott Bessent. “In that meeting he said he was progressing what he could to try and resolve these issues and we’re really pleased to see some of that progress in his announcement today,” Chalmers said, adding Australia “will continue to engage constructively” on international tax rules.

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A delegation of major Australian funds visited Washington and New York in February seeking deeper investment opportunities, but growing tariff uncertainty has since prompted some to reassess their positions.

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Prior to Bessent’s comments, Leigh Gavin, Chief Investment Officer at Cbus Super, which manages A$100 billion, said the potential levy made them wary of some transactions. “We haven’t done any infrastructure deals in the US this year,” he said. “The difficulty in underwriting your forecast for many years with these potential tax changes makes us a little bit more cautious.” The tax also prompted AMP Ltd., one of Australia’s largest pension and wealth managers to halt long-term US investments.

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The Association of Superannuation Funds of Australia welcomed the latest move but noted that there was “still a way to go” because amendments need to be made by lawmakers.

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“This section of the legislation would have changed the risk return profile of investment in the US, which would have been a poor outcome for all involved,” James Koval, Chief Policy & Advocacy Officer at ASFA said in a statement. 

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