# Offshore accounts and the ATO



## derty (5 May 2008)

I have been contacted by a representative from international broker and are considering swapping some money from a flat-lining managed fund into an account. 

One of the pro's he is using is that once the account is set up the money is held in a Honk Kong bank that I can access my 'tax free' profits at will. Obviously this sounds great but does it work like this in reality? Surely the ATO has mechanisms in place to regulate this?

Does anyone have some experience in this at all?


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## Andy_aus (5 May 2008)

My experience is that as soon as you bring your money back into aus, you get it taxed as part of your income.

Correct me if im wrong, if there are more experienced members out there.


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## disarray (5 May 2008)

if you are bringing money back into australia then you have to declare it and pay tax on it. there are ways around it but by doing so you will be breaking the law. you can have an offshore account and an international debit card and you can take small parcels of money out of the ATM whenever you feel like and it will be difficult to trace. thats probably what the broker was suggesting. 

an exception is gambling - you can setup an offshore gambling account and feed money from the broking account into that and use the gambling account to funnel the money back into oz and declare it as gambling proceeds and you don't have to pay tax on it.

the government wants to play the globalisation game so climb on board, internationalise your funds and join big business in the big international tax avoidance loophole festival.

here is another lengthy thread on the subject from a while ago - https://www.aussiestockforums.com/forums/showthread.php?t=5631


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## derty (5 May 2008)

disarray said:


> you can have an offshore account and an international debit card and you can take small parcels of money out of the ATM whenever you feel like and it will be difficult to trace. thats probably what the broker was suggesting.



That was exactly what was suggested. Thanks for the information, I will check out the linked thread.


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## derty (6 May 2008)

Here are a few relative items I found regarding the topic; 

http://www.smh.com.au/news/national...edit-card-rorts/2005/08/16/1123958064889.html

http://www.ato.gov.au/corporate/content.asp?doc=/content/46908.htm&page=33

http://blogs.theaustralian.news.com...ustralian/comments/following_the_money_trail/

It seems that AUSTRAC runs a pretty tight and connected operation. I don't think that if you were consistently electronically bringing money back in that you would get away with it for long, even in small amounts. 

Might be a useful setup to fund overseas holidays as the money would never re-enter Australia and then theoretically should be of no consequence to the ATO.


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## wildkactus (6 May 2008)

The key is to keep the money OS and use it OS, also i would have it under a corporate structure so it is not directly linked to you.
But this is still against the law as you are supose to report all income even OS income if you are a resident of OZ for tax purposes.

Hence this is one of my reasons for my move OS, no more tax to the OZ government for what they are not entiled (money not earned in OZ that is).

If unsure see a good accountant / lawyer who specialises in these affairs.


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## Whiskers (6 May 2008)

derty said:


> Might be a useful setup to fund overseas holidays as the money would never re-enter Australia and then theoretically should be of no consequence to the ATO.




I think if your talking about personal income you will still be liable for tax in Aus, derty.

If you traded/invested through a company structure you may be able to spend some of the entity's cash without being liable to Aus tax, provided it wasn't provided via a dividend or some similar type of distribution, ie to cover your travel and accomodation costs between Aus and the entity's place of business and on business related travel... you know to check out potential business/investment prospects. 



> Foreign source income
> If you are an Australian resident who has received income from overseas, you must show your assessable foreign income on your tax return – even if tax was taken out in the other country.
> 
> Foreign income that is exempt from Australian tax may still be taken into account to work out the amount of tax you have to pay on your other income. You may need to include this income in your tax return.
> ...


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## theasxgorilla (6 May 2008)

Andy_aus said:


> My experience is that as soon as you bring your money back into aus, you get it taxed as part of your income.
> 
> Correct me if im wrong, if there are more experienced members out there.




The key trigger is whether the trading activity and profits are conducted from a non-personal entity, like a foreign company structure, for example.  If the trading activity is from an account in your name then any profits you make are classified as foreign source income and you will have to declare it and pay tax on it.

Offshore activity is typically done via a legal structure like a company, of which the individual is setup as a director.  The trick is in enabling personal benefit from profits without it becoming foreign source income...good luck


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## theasxgorilla (6 May 2008)

disarray said:


> the government wants to play the globalisation game so climb on board, internationalise your funds and join big business in the big international tax avoidance loophole festival.




Well put disarray...you say in so many words is my own personal philosophy.  On one hand the gov wants to make us more internationally competitive (thing individual workplace agreements), and on the other hand we're not expected to make our tax arrangements more 'internationally competitive'???  Pick up one end the stick, invariably you get the other end.

In fairness though the changes to personal tax levels and the superannuation tax really makes offer less necessary.


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## wildkactus (6 May 2008)

theasxgorilla said:


> Offshore activity is typically done via a legal structure like a company, of which the individual is setup as a director.  The trick is in enabling personal benefit from profits without it becoming foreign source income...good luck




Even if you are a director especially a sole director you can still be liable for tax on profits, From what I have been told.
The real trick is to be at arms length and not seen as beening in control or the benificery of the activity from the OS company.

This can be done but tricky to do, something to look at would be an OS For profit foundation as the principle owner / operator.


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## pierre969 (1 October 2008)

How about having a nominee shareholder and director so your name does not appear anywhere on the offshore company formed. Is that arm's length enough?
then the company trades and makes money but at some stage you may want to reimport some back into Oz. What do you do then.

Using untraceable company debit cards is easy enough to set up in an onshore or offshore location but it has its restrictions although your can spend money just about anywhere in the world.


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## GreatPig (1 October 2008)

pierre969 said:


> How about having a nominee shareholder and director so your name does not appear anywhere on the offshore company formed. Is that arm's length enough?



No. The tax guidelines are very broad, and always talk about taxpayers "and their associates". An associate is pretty much anyone who might be acting in your interest.

As has been mentioned, for income in your own name you have to declare it as foreign-sourced income and pay tax locally. For foreign companies and trusts, you need to read the rules regarding CFCs (Controlled Foreign Companies) and the Transferor Trust measures. It's difficult to arrange a situation where you're not covered by one of those rules.

Take a look here, and particularly at the foreign income return form guide.

All just my own understanding of course. See your own expert.

GP


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## pierre969 (1 October 2008)

I understand what you ae saying and it means that Australians, like Americans but unlike UK, pay tax on their worldwide revenues. Is this correct?


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## GreatPig (1 October 2008)

Yes, by my understanding. There are tax treaties with many countries though to avoid double taxation, so if you've already paid tax in the other country, you'll get a credit for it here (if there's a treaty with that country).

GP


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## noirua (22 May 2020)

Establishes Offshore Corporations, LLCs, Trusts, and Bank Accounts · Since 1906
https://www.offshorecompany.com/banking/swiss/costs/


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