# Tax havens for futures trading



## John Swift (6 June 2014)

Simple question:

Setting up a company in the British Virgin Islands (or some other tax haven) to trade CFDs or futures... is that illegal for an Australian tax resident?

I suspect its not really a simple question. But if anybody has some thoughts or pointers as to where to go for more information, that would be much appreciated. Small and even medium sized accounting firms don't seem to have a clue... and I don't have $500k to spare to go to the Big 4 for that sort of advice.


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## McLovin (6 June 2014)

John Swift said:


> Simple question:
> 
> Setting up a company in the British Virgin Islands (or some other tax haven) to trade CFDs or futures... is that illegal for an Australian tax resident?
> 
> I suspect its not really a simple question. But if anybody has some thoughts or pointers as to where to go for more information, that would be much appreciated. Small and even medium sized accounting firms don't seem to have a clue... and I don't have $500k to spare to go to the Big 4 for that sort of advice.




Unless you plan on living there, you will still pay tax in Australia. If you are resident in Australia for tax purposes, the ATO will tax you on your world wide income.

ETA: And setting up a company in a tax free jurisdiction to try and "shelter" the assets from tax won't work either. The word escapes me right now, but essentially the ATO will say the company exists solely to provide a tax shelter to you. The rule of thumb is if it's a structure designed to minimise/remove tax then it will be disallowed.

I came up with a gloriously complex set of unit trusts and discretionary trusts that would have meant I could live in Australia and pay no tax. It was all "legal" but I ran it past a tax partner who gave me five stars for effort but said the ATO would be all over it.


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## John Swift (6 June 2014)

Thanks McLovin, that's useful information.


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## Julia (6 June 2014)

Please pardon my impertinence, but if you're earning money in Australia, why would you find it so inappropriate to pay the relevant tax on those earnings?

How would our society function if not for the contributions of its members?

And please don't quote Kerry Packer.  I'm just asking a basic sociological/moral question.


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## Ves (6 June 2014)

McLovin said:


> Unless you plan on living there, you will still pay tax in Australia. If you are resident in Australia for tax purposes, the ATO will tax you on your world wide income.
> 
> ETA: And setting up a company in a tax free jurisdiction to try and "shelter" the assets from tax won't work either. The word escapes me right now, but essentially the ATO will say the company exists solely to provide a tax shelter to you. The rule of thumb is if it's a structure designed to minimise/remove tax then it will be disallowed.
> 
> I came up with a gloriously complex set of unit trusts and discretionary trusts that would have meant I could live in Australia and pay no tax. It was all "legal" but I ran it past a tax partner who gave me five stars for effort but said the ATO would be all over it.



It just gets picked up in Part IVA of the Tax Act - the anti-avoidance provisions,  that outlaws schemes that have the _dominant purpose_ of avoiding tax.   

Much harder to get away with this now.   Most of the so called "tax havens"  have improved their disclosure to foreign governments from what I have read,   and the ATO is running project Wickenby and other such campaigns against off-shore income arrangements / tax sheltering / asset concealment in off-shore jurisdictions.

The bottom line is:   if you are an Australian resident,  you must under the law declare all income and pay tax here on all of that income,  no matter where you try to hide it.


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## Muschu (6 June 2014)

Julia said:


> Please pardon my impertinence, but if you're earning money in Australia, why would you find it so inappropriate to pay the relevant tax on those earnings?
> 
> How would our society function if not for the contributions of its members?
> 
> And please don't quote Kerry Packer.  I'm just asking a basic sociological/moral question.




Well expressed Julia.  To live here and pay no tax amounts to living off the taxes paid by others.  I certainly would not feel comfortable doing that.

I read an article the other day (accurate or not I don't know) about the small percentage of extremely wealthy people in Australia who pay no tax.  I don't recollect the exact figures (perhaps someone else has this info) but I found this appalling.

Now, if none of us paid any tax........


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## McLovin (7 June 2014)

Julia said:


> Please pardon my impertinence, but if you're earning money in Australia, why would you find it so inappropriate to pay the relevant tax on those earnings?
> 
> How would our society function if not for the contributions of its members?
> 
> And please don't quote Kerry Packer.  I'm just asking a basic sociological/moral question.




I don't have a problem paying tax, and my aforementioned example was just a theoretical discussion I was having over a fairly long boring wedding reception. Having said that it would be interesting to ask the same question in the super thread.


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## Wysiwyg (7 June 2014)

Muschu said:


> Well expressed Julia.  To live here and pay no tax amounts to living off the taxes paid by others.  I certainly would not feel comfortable doing that.



I pay more tax than average, more medicare than average and pay more council rates than average but I do not get any additional benefits. The system makes those who work longer and invest wiser pay more tax yet get no additional societal benefits over the bludger next door.


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## John Swift (16 June 2014)

I'm not sure why its a bad thing to look to legally minimize tax. If someone sets up a company (as in another recent thread on this board) and does their trading through that they can save up to 18.5% on their tax obligation. Nobody thinks that's immoral.

I'm not looking to hide income or evade taxes and I certainly support the philosophy that income derived in Australia as well as international income for Australian tax residents should be taxed. But if there is a way that the trading I do can be deemed as being not derived in Australia (just because you click a button in Australia doesn't mean it is income derived here, nor should it be)... and that only the income coming back to me personally is taxed (as an Australian tax resident), then this seems fair as well.

Anyway.... just thought I'd drop back in to say that as it is futures trading (in multiple international markets) through an international broker, it is quite common and legal for tax structures to be set up in tax haven countries to reduce tax on trading profits. This is advice I personally received from three partners of separate mid-sized accounting firms. What will be taxed is the income that gets repatriated to Australia.

I won't go into specifics, but will just say that it is possible in some circumstances.


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## McLovin (16 June 2014)

John Swift said:


> just because you click a button in Australia doesn't mean it is income derived here, nor should it be




Yes, it is. Ring the ATO and tell them that your employer will now be paying you from their Cayman Islands account to your Caymans account. See what happens when you explain that just because you did the work in Australia doesn't mean "it is income dervied here". 



John Swift said:


> This is advice I personally received from three partners of separate mid-sized accounting firms.* What will be taxed is the income that gets repatriated to Australia.*




The bolded bit is not true. At least not at the level that we are discussing here.



			
				 Wysiwyg said:
			
		

> I pay more tax than average, more medicare than average and pay more council rates than average but I do not get any additional benefits. The system makes those who work longer and invest wiser pay more tax yet get no additional societal benefits over the bludger next door.




Ahh...but you can walk down the street without someone trying to rob you, you don't live behind razor wire, you can invest safely knowing the rule of law is strong and property rights are protected. Those are all things you pay for with tax. IMO, the more you have, the more benefit you gain.


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## VSntchr (16 June 2014)

McLovin said:


> Ahh...but you can walk down the street without someone trying to rob you, you don't live behind razor wire, you can invest safely knowing the rule of law is strong and property rights are protected. *Those are all things you pay for with tax. IMO, the more you have, the more benefit you gain*.




I agree wholeheartedly with that McLovin. A couple of my high tax paying friends just don't seem to understand that. In addition I think that the reason they can earn such a high income, is partly due to the fact that the infrastructure set-up within this country affords them the ability - thus linking back to your statement about the more you have, the more benefit you gain.


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## Panaman (16 June 2014)

Sadly its acceptable and I often here or see people who are almost boasting about the ways there avoiding tax or looking for ways to do so.

I’m happy to pay tax, it maintains this country with democratic government, world class health and education and all manner of services we take for granted, a society we should all try and support.

Its often the very rich and very wealthy though who can get away with paying very little tax and there idolised for it, this I think is a sad reflection of the greed society we are becoming, Rupert Murdoch its rumoured pays only 3%, Kerry Packer also paid very little and is held up as this great human being for saying things like you’re a fool if you don’t try and minimise your tax blah blah blah.

In my humble opinion the people who cheat or try and cheat the tax system or look for dodgy loopholes by setting up complex accounts and trusts should be shunned by society and treated as the selfish greedy criminals they are.


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## banco (16 June 2014)

Quite a few traders live in Thailand full time for tax/cost of living reasons.


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## Wysiwyg (16 June 2014)

banco said:


> Quite a few traders live in Thailand full time for tax/cost of living reasons.



Yeah it is interesting how some governments do not see the need to tax the populace for every single dollar they earn. I mean how much is enough? Enough is at the level the majority can make a slow advancement in their life quality and that is the level the taxes are maintained at. 

I don't understand how I should support the life of someone who contributes little or nothing in the way of taxes. My energy and effort to support those that are too fat and/or lazy and know the country will give them as much support as they cry for. It is their right!


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