Australian tax ruling targets offshore hedge funds

Limited partners are liable for capital gains

Australian Taxation Office wins legal battle against Cayman hedge fund

Offshore hedge funds could face higher tax bills in coming years after the Australian Taxation Office (ATO) won an important legal battle against a Cayman Islands fund last week.

The Federal Court of Australia ruled that Resource Capital Funds, a mining-focused private equity firm domiciled in the Cayman Islands, was liable to pay the tax on the capital gains of a recent share disposal.

Resource Capital Funds argued that it should be treated as a fiscally transparent entity according to US law,