Australia’s Enduring Appeal for Alternative Funds

Australia is globally recognised as an attractive jurisdiction for alternative funds. This is in no small part thanks to its stable legal and geopolitical environment and highly skilled financial services workforce. This foundation continues to shape how global investors see the market’s long-term potential. 

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Here, we will explore how the sector can take advantage of these strengths while navigating ongoing legal and regulatory developments.

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Deep Capital Pools and Tax Efficiency

Australia offers strong capital access, including a $4 trillion superannuation system and substantial wealth management and product distribution channels. Established tax-efficient regimes — Managed Investment Trusts (MITs) and Attribution Managed Investment Trusts (AMITs) — add to the appeal. 

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By providing concessional withholding tax rates for eligible foreign investors, these structures draw foreign capital and support cross-border investment. The advantages, however, now sit alongside a shifting regulatory landscape that fund managers must prepare for. 

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Navigating Key Regulatory and Tax Headwinds

The sector is now facing several emerging challenges. Regulatory reviews by ASIC are increasingly relevant for private markets and private credit funds, and new AML/CTF laws will commence between March 31st and July 1st 2026.

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Here is how fund managers can prepare:

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• Anticipate regulatory reviews: ASIC has released results from its consultation on public and private markets on November 5th, with recommendations for increasing transparency and accountability in private markets. ASIC encourages alternative fund managers to improve poor practices identified in private credit and private markets within the next 12 to 18 months, particularly practices concerning product distribution, fees and costs, margin structures and management of conflicts of interest.
• Prepare for operational changes: New AML/CTF laws will affect operational requirements starting in 2026.
• Address tax deductibility constraints: Earnings-based thin capitalisation rules implemented in July 2023 reduce interest deductibility for leveraged transactions.
• Monitor restructuring scrutiny: The ATO announced heightened scrutiny of MIT restructures in early 2025, meaning fund managers must demonstrate a stronger commercial rationale.

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These developments set the stage for a broader shift in what long-term success will require, in particular from alternative fund managers in private credit and private markets.

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The Mandate for Future Success

To remain competitive, fund managers must evolve to meet investor demands by balancing Australia’s investment strengths with growing demands for transparency, compliance, accountability, liquidity and accessibility.

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Long-term success will rely on better compliance with  existing regulatory requirements in line with ASIC expectations, while navigating new requirements and inevitable surveillance activity by ASIC, while maintaining investment discipline and focusing on strong core performance. There are still significant opportunities ahead for those who can adapt to these shifting requirements.

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Positioning Your Business for Opportunity

Despite the changing landscape, Australia continues to offer strong potential for sustained economic growth. Alternative fund managers who evolve with regulatory and compliance developments will be well-placed to capture the opportunities that lie ahead — but it will require discipline around proactively managing new regulations and regulatory scrutiny. 

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For support navigating regulatory and compliance developments in the alternative funds sector, get in touch with PMC Legal.

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