Kerry Packer and Tax

[iookpa]

Some years back I read The Rise and Rise of Kerry Packer - great read and recommended.

In it, the author speaks of Kerry Packers' use of off-shore companies for tax relief - ie, Company ABC operates in the Bahamas, while XYZ operates in Australia.

Company XYZ makes $10m, so company ABC sends an invoice for $10m for "Advisory Services".

The $10m is declared as profit in The Bahamas, which has no corporate tax.

What legislation exists nowadays to prevent this from happening?

 

[Mry]

Usually this.

http://www.ato.gov.au/businesses/content.aspx?doc=/content/54621.htm

 

[Terryw]

It still happens though. Look at the structure of Ikea.

iookpa, I put a diagram up here somewhere of the packer business structure.

 

[coastymike]

Yes it still happens. Unless you have the funds to setup a permanent establishment in that jurisdiction then dont waste your time reading about it. If you run a grocery store in mosman or a bakery in petersham then forget it. Sure you could setup a lovely admin structure offshore but for these type of businesses the costs will outweigh the benefits. If you have a 30m turnover business then we can talk otherwise concentrate on your core business and not on strategies that wont work for your business type.

 

[iookpa]

Mry - cheers for the link.

Terry - would be very grateful if you could find the link to the diagram.

Mike - PM sent.

 

[Terryw]

try this
http://www.somersoft.com/forums/showthread.php?t=63989&highlight=packer+structure

 

[Aaron_C]

You're not aiding and abetting tax evasion eh Terry?

 

[Terryw]

no, just minimisation.

 

[coastymike]

I will reiterate that these structures are for international business dealings not for local businesses. I have had to deal with the offshore compliance unit and organised crime unit at the ato on these very matters. These structures are interesting but so is dating a high class model from brazil. Both are out of the reach of must of us. Look , dream and maybe fantasise but dont waste too much of your time thinking about it for real.

Terry you and i know full well this sort of minimisation could be utilised by hardly anyoone on here so to say tax minimisation is quite misleading. And if you have setup the structure for the tax benefits i will give you a whole raft of different types of legislation which wil destroy this structure and part iva is only one of them.


The legal business structure of google is also interesting but that is all it is for most people. If your business has international dealings turning over billions of dollars then discuss with baker mckenzie setting up a google like structure. I was advising an accountant with a client about them setting up in the caymans. Once they found out the costs of operating from there they said "this is too expensive" well no it isnt when you are google. But i can guarantee noone on her owns a billion dollar a year international conglomerate.

Dazz got it right last time this was posted. Go out and concentrate on things that matter.

 

[iookpa]

Cheers for the link Terry - it answered my question as to how their structure is setup.

 

[Terryw]

Remember, don't try this at home - especially if you are just running the corner grocery store.

I am off now, going on a date with a Brazilian model.

 

[iookpa]

Remember, don't try this at home - especially if you are just running the corner grocery store.

I am off now, going on a date with a Brazilian model.

Enjoy

More interested in how he got away with it - the article answered it all; it was all to do with ol' Frank setting it up when he was alive.

 

[Pete]

Excuse the off topic comments, but they came to mind reading the thread. An article in the AFR paper during the last week described that Visy were to set up a ~30 person office in Singapore (I think) to do buying out of China, and servicing their Asian clients. I was surprised in the article to read that Visy spend 2 billion dollars annually on plant, equipment & capital works. The idea was the by buying themselves through Asia they could save hundreds of millions of dollars annually, and I think even become a bit of a supplier themselves. A trading business of sorts. Huge business anyway. I think their (paper) products to overseas (from Australia) were 700,000 tonnes per annum. There was nothing in the article about tax, and it isn't why I mention it either, just thought it might be of interest to read about the scale of the business and their offshore ventures.

I'm no accountant, btw, but I remember too hearing on the radio some years ago about when the thin capitalisation rules. It was targetted IIRC at foreign companies that ran businesses in Australia and these entities made basically no profit and all the profit ended up in the base country with Australia missing out on tax revenues.

I guess always plenty of work to keep the ATO busy chasing these sort of things.

Something too in the AFR this week (I guess it happens often too) about the ATO looking to target ~50,000 small businesses (out of ~900,000) that are at the lower end of profit ratios/margins.

Tax. It is quite an industry in itself...

 

[SamSiam]

I heard via someone in the know...but not willing to express any detailed info based on client confidentiality and all that stuff....piles of cash too maybe...but the ol croc hunter and his zoo were set up as a charity of sorts in an offshore locale and now all the income through the place is basically taxless..

Anyone know any juice on this ??

 

[capitalist]

the ol croc hunter and his zoo were set up as a charity of sorts in an offshore locale and now all the income through the place is basically taxless.. ??

Wouldn't surprise me as he was a savvy guy surrounded by highly paid advisors despite his public persona. Ever heard of L. Ron Hubbard? Apparently he said there's more money in religion than writing pulp fiction due to the tax benefits that religions receive. Taxless (sic) is tax free. Same same but different. Get the t-shirt in Khao San Rd.

 

[Deltaberry]

The cartel which is designed to legally rob from you has many ways to get you for this. Back in my brief unfortunate days as a corporate tax advisor (4 months it was at the likes of Mallesons/Freehills), I saw many big companies hit by the cartel known as the ATO for $100m bills. Of course we took them to court since luckily our clients were just a tad richer than the Australian Government.

Even today I see companies utilise the Singapore trick - a prominent miner uses Singapore to "market" their Australian resources and in doing so draws a commission off the sale price. Of course there's no mention of tax at all in the minutes, meetings etc when we the set up this structure - that's all off the record.

 

[coastymike]

Yep still happening and provided it complies with the transfer pricing laws then it isn't an issue.

What I find frustrating is people who want to minimise tax as though they were a billionaire with international business interests when they are not.

A very effective way to minimise tax is to become a non resident and move to a low tax jurisdiction. Ohh but that means moving !!! The problem is everyone wants everything. Well there are different rules for the rich and different rules for the middle class. It is how it has been for centuries.