offshore banking possible?

ill put this in hypotheticals as im not too sure about alot of it...

lets say, hypothetically, I lived overseas for a number of years and wanted to transfer my savings back to australia on my return or immediately preceeding it. i have been told that after already being taxed o/s i will also be taxed in Oz.

if this is the case, if I set up an offshore bank account (which I assume is legal to do) can i transfer earnings (or future earnings at a later date) to Australia without having to pass it through my country of residence? or is this a no-no?

i have read that it is possible to move money into an o/s pension fund and legally send it back to Oz upon return, but only once, without having to pay tax on it?

it sounds like a grey area to me

any opinions are welcomed
 
I'm not an accountant or tax professional, although I have enquired into this matter for other reasons. Seek professional advice. That said, here's my understanding of the general concepts in play here.

There are protections against being double taxed. Generally, you can get credits for tax paid overseas. However, if the tax payable here exceeds the tax payable there, you have to pay the difference.

Whether tax is payable depends on whether you are a resident or not for tax purposes (different criteria than anything to do with immigration). Residents have to pay tax in Australia on everything they earn anywhere in the world. (That's where your overseas tax credits mostly come into play). Non-residents only pay tax in Australia on anything earned in Australia. Everything else is subject to the tax laws of where it is earned and/or where they're resident.

I don't think you can be taxed just for bringing money into the country. You're taxed on earnings, not savings. You shouldn't be taxed (unless I'm missing something) until there is, for instance, interest earned on the savings. If you're not a resident you would be taxed at a higher rate because you don't get the first $6K tax free, but you probably won't pay the Medicare levy. Banks might also take the maximum withholding from a non-resident, although you can of course get any excess back at the end of the financial year.

If you try to set up some sort of pension fund with concessional tax treatment, I would get an ATO ruling on it regardless of what anyone told me, unless there was already clear ATO guidance. (Depending on your age and/or physical health and/or future residency plans you could also do it here within an SMSF). At the end of the day the ATO will follow their interpretation of tax law, not yours or the person selling you the product.

As for channelling funds through an overseas bank account, it depends on why. If it's the country you lived in or have business with or just gets you the best return, that's probably okay as long as it's all declared wherever it's required to be declared. If it's a country with which you have had no dealings solely to reduce/eliminate your tax, that's not okay. The ATO would probably see it as an arrangement you entered into solely to avoid tax.

I think I would be looking at (1) would I be a resident under my current plans, (2) would I be better off as a non-resident and can I change my arrangements to fit that criteria (remember, you may be forfeiting benefits such as Medicare and the $6K general exemption), and then go from there. Remember, if you're a resident, everything you earn anywhere in the world is taxable here, either at normal rates or on some kind of concessional basis. This may include nil tax and/or nil tax after foreign tax credits or franking. But there's nothing you can do to completely remove it from the Australian tax system.
 
Any tax minimisation strategies will likely depend on the specific country. For example, five years ago you could work in the UK and there were companies (at least one set up by an Aussie) with the know-how to take care of your income, funnelling it back to Australia via Singapore in such a way that the minimum but legal amount of total tax in both countries was paid. I don't recall the tax % but somewhere in the vicinity of 20% on a top-bracket income.

(EDIT: I've now dug up the effective tax rate - it was about 15%.)

Given the changing nature of tax law I can't guarantee such structures are possible today, but it's possible someone has worked out a solution for your country of choice, and you should consult with as many ex-pats and accountants as you can find.
 
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Any tax minimisation strategies will likely depend on the specific country. For example, five years ago you could work in the UK and there were companies (at least one set up by an Aussie) with the know-how to take care of your income, funnelling it back to Australia via Singapore in such a way that the minimum but legal amount of total tax in both countries was paid. I don't recall the tax % but somewhere in the vicinity of 20% on a top-bracket income.


This type of thing goes on in the UK all the time - IT and finance contractors work through umbrella service companies established in places like the Isle of Man, Guernsey, etc whcih result is a total tax of roughly 10%-20%, on incomes of roughly GBP60k-100k.

I was always employed in the UK so could never do it myself, and I still doubt how well it would stand up to the Inland Revenue if/when they audit you, but many of my aussie mates who are in the UK at present are still doing it.
 
If I set up some investments / income stream overseas with NO intention of bringing the $$ back to Australia, do I need to report it as income earned ?
 
In line with Jonathans post...
I'll preface this with 'I think' - I had a client doing something along these lines a while back - in the IT industry.

if youre getting GBP then you funnel it thru singapore as a FBT(?) payment. As they dont have FBT its then exempt, a clearing bank takes about 3% as a fee and it comes into Australia as clear cash already taxed.
 
I've forgotten the specifics but what Spectre says sounds about right. I found out what the effective tax rate was (15%) and updated my earlier post.
 
I've forgotten the specifics but what Spectre says sounds about right. I found out what the effective tax rate was (15%) and updated my earlier post.

Don't you still have to pay the amount of Aussie tax exceeding the Singapore tax ?

For example, if your Aussie tax rate is 35% and your Singapore income was already taxed at 15%, you will still need to pay 20% tax on the amount the income ?
 
funnell it through singapore as an FBT ? So who owns the Singaporean entity. If you have an Australian shareholder then the CFC rules come into play and the income might need to be attributed back anyway removing any tax benefit.

Do you have a permanent establishment in Sing ? what are the services for ? Has proper transfer pricing been applied ? Is it just part of a scheme to which Part IVA applies ?

We have a number of clients with offshore entities and associated transactions. It is a complex area and a lot of people have in the past created offshore entities, billed from that entity and then brought the money back into Australia or kept it offshore. The ATO has uncovered many of these type of transactions and with better disclosure between banks around the world (yes including Switzerland) a lot of people will eventually be caught.

If you have a CFC with a permanent establishment offshore earning active income then this can be effective tax planning.
 
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