BABCOCK & BROWN

2 Non-Australian residents
2.1 Treatment of Interest Payments on the BBSN
Interest Payments on the BBSN will not be assessable in the hands of non-resident Holders.
In addition, on the basis that the issue of the BBSN satisfies the so-called “public offer test”
pursuant to section 128F, non-resident Holders should not be liable for any Australian interest
withholding tax in relation to the Interest Payments on the BBSN.
2.2 Treatment of disposal, Repayment, Exchange or Resale of BBSN
Any gain or loss arising on the Exchange of the BBSN for Ordinary Shares would be disregarded
for non-resident Holders.
In the event of Repayment, we consider that any excess would be regarded as akin to interest and
treated in a similar manner to 2.1 above.
In the event that a gain arises from the sale or Resale of the BBSN, subject to the availability of any
relief provided under a double taxation agreement entered into between Australia and the
jurisdiction in which the non-resident Holder is resident, such gain may be assessable in Australia if
it is regarded as having a source in Australia.
In this regard, the ATO appears to be of the view that the source of gains arising in relation to
securities such as the BBSN would be where the contract giving rise to the disposal has been
concluded. Accordingly, there may be a risk that the ATO could form the view that the source of
any such gain would be in Australia.
2.3 Holding Ordinary Shares
Dividends that may be paid by Babcock & Brown to a non-resident Shareholder would not be
assessable in the hands of the non-resident Shareholder. Rather, unfranked dividends paid by
Babcock & Brown would be liable to Australian dividend withholding tax. The rate of Australian
dividend withholding tax is generally 30%, but may be reduced in certain circumstances,
particularly pursuant to a double taxation agreement entered into between Australia and the
jurisdiction in which the non-resident shareholder is resident. Franked dividends paid by Babcock
& Brown will not be liable to Australian dividend withholding tax.
Unless the non-resident Shareholder holds at least 10%, by value, of the shares of Babcock &
Brown, any capital gain or loss that may arise upon the subsequent disposal of the Ordinary Shares
would be disregarded for Australian tax purposes.
3 Goods and Services Tax (GST)
Holders and non-resident Holders should not be liable to GST in relation to their holding or
disposal of BBSN.
Yours faithfully
GREENWOODS & FREEHILLS PTY LIMITED
per:
Ernest Chang
Director
9 November 2005
Liability limited by the Accountants’ Scheme, approved under the Professional Standards Act 1994 (NSW)
Greenwoods & Freehills Pty Limited ABN 60 003 146 852
64 BABCOCK & BROWN SUBORDINATED NOTES