Offshore Banking Unit regime reforms underway 29 May 2015 3:38PM Shereel Patel The changes to the Offshore Banking Unit regime, originally announced in the 2013-14 Budget, are underway.The reforms are set to target a number of integrity concerns with the existing regime while ensuring the OBU regime targets mobile financial sector activity. Under the current law an OBU can convert ineligible activity into eligible OB activity by undertaking non-eligible activities through an offshore subsidiary, and trading in the shares, securities and units of the subsidiary (which is itself an eligible OB trading activity).What is proposed for the new law is that the range of eligible trading activities will exclude trading in subsidiaries or other entities where the OBU holds a ten per cent or more interest. It will also exclude trading in interests that are not 'held for trading' according to the OBU's accounting records.The 'choice principle' is embodied in a tax determination issued by the Commissioner under the current law and the new law would see the 'choice principle' clarified and codified in legislation.The law currently lists eligible OB activities, although this list has not been updated since 1998. With the new bill the list of eligible OB activities will be modernised to add certain mobile activities.Currently there is no requirement within the OBU regime that internal financial dealings be on an arm's length basis. Under the reform internal financial dealings will be treated as being on an arm's length basis for the purpose of calculating an OBU's OB income or allowable OB. The government had earlier announced the start date for reform of the offshore banking unit as 1 July 2015.Submissions for the proposed legislation close on 8 April 2015.