Banks have won more time from the Australian government to negotiate the detail of planned changes to the offshore banking unit regime. The government said on Friday that it had decided to defer the start date by three months from today, until October 1, 2013. In a discussion paper released on Friday, Treasury explained its concerns more clearly. It said: "The OBU regime is being used to transfer domestic banking activities and non-banking profits into OBUs."According to Treasury there may be an "[im]proper allocation of expenses between OB activities and non OB activities." It said rules on this point "have proven to be ineffective or unclear in some circumstances."Under the OBU regime, an entity that is an OBU is subject to an effective tax rate of 10 per cent on income from eligible activities. Other income of the entity is taxed at the normal company tax rate of 30 per cent. Treasury asserted that "some taxpayers [are] engaging in arrangements that inappropriately access the concessional 10 per cent rate, including through the re-characterisation of ineligible income.""Cases have been identified where the OBU provisions have been used to access the concessional 10 per cent rate for income from activities that are in substance not eligible OB activities. "In other instances, the provisions have been used to ensure that income or gains are attributed to the OBU while deductions or losses are allocated to the domestic bank, providing an effective arbitrage between the different tax rates."Treasury singled out "three particular types of arrangements" that are of concern:• related party transactions that have the effect of converting non-OB income to OB income• transactions transferred between an OBU and other parts of the entity, so that gains are attributed to the OBU while losses are attributed to domestic bank• trading in shares or securities issued by a related party that has the effect of converting non-OB income to OB income, such as the sale of significant overseas non-banking assets via the sale of shares in a non-resident subsidiary.Treasury also raised "concern that OBUs could be used to fund offshore subsidiaries with any interest income received from the subsidiary being inappropriately taxed at the concessional 10 per cent rate."The Australian Financial Markets Association said on Friday that the measure, as originally proposed "constrains bona fide OBU transactions."According to AFMA, "a successful OBU regime contributes to Australia's ability to retain and attract internationally mobile financial services business."