The Australian government is moving to lure more investment by encouraging foreign-based firms to establish regional headquarters in Australia.

It is envisaged that Australian businesses with foreign operations will also become more competitive, following the release of exposure draft legislation relating to Controlled Foreign Company (CFC) and Foreign Accumulation Fund (FAF) rules.

The rewrite and modernisation of the CFC rules, together with the proposed FAF rule, form part of a wider package of reforms to Australia's foreign-source income attribution rules that were announced in the 2009-10 Budget.

Assistant Treasurer, Bill Shorten said, “This package of reforms will improve the competitiveness of Australian companies with offshore operations by reducing the costs of complying with the CFC rules.

“They will also encourage foreign groups to establish regional headquarters in Australia and improve Australia's attractiveness as a continuing base for our multinational companies," he said.

The government is consulting with industry on the draft legislation and has invited submissions by 18 March 2011.