The comments from Nick Sherry, Australia's assistant treasurer, mark the first time that the government has indicated a timeline for the change.

Australia joins a growing number of non-Muslim countries, which include Hong Kong, looking to develop their Islamic finance sector by changing regulations to attract investors who can only put their money in sharia-compliant assets.

Islamic financial transactions can be costlier than conventional deals as they often involve multiple sale and purchase transactions, which create a greater tax liability.

I think in the second half of next year we will be able to outline specific legislative change, Sherry said in an interview.

More countries have been exploring Islamic banking since the global financial crisis and Australia, which is dependent on foreign capital for its growth, is keen to become an Islamic finance centre.

Sherry said the government wanted to develop the industry as a whole, rather than specific areas such as sukuk financing or wealth management products.

I favour as comprehensive a set of changes as possible in one-go. I don't see (it) as the government's role to target particular areas, Sherry said.

HSBC and Australia's investment bank Macquarie are among those that want to offer sharia-compliant products in Australia, he said.

Islamic finance is derived from the sharia which forbids charging interest and favours profit-sharing arrangements or structures that resemble rental agreements. These transactions are underpinned by physical assets.