Offshore companies

[natmarie73]

Hello all,

I was wondering if anyone out there has incorporated an offshore company before, particularly in the Cayman Islands and if so, how did you go about it and were/are there any pitfalls/challenges etc. I have found many useful resources via Google on how to go about doing this, but was after any hands on experience or tips from those who might have travelled down this particular road before.

Thanks in anticipation

Nat

 

[geoffw]

No hands on, but Lance Spicer and Trident Press put out a few books on setting up offshore accounts and the like, and Ed Burton presents info in his seminars.

I'm not sure if anybody who has done it would admit to it in an open forum.

Peter Spann has been to seminars where they present this sort of info, and suggests that it's not really worth doing with the amount of capital an ordinary investor deals with. It's something outside my own personal comfort zone as well.

 

[natmarie73]

Thanks Geoff,

I was under the impression that it is a perfectly legal form of tax evasion er, tax avoidance oops I mean tax planning... Seriously though, is there a chance it is not legal - I certainly don't want to break any laws!

I will hunt down for Lance Spicer's books, thanks for the tip!

Nat

 

[DaveJ]

Lance Spicer

Have a surf to www.tridentpress.com.au Should be what you are looking for.

DaveJ

 

[Patosan]

G'day Nat,

My understanding of the system is that the major benefits of going offshore are to minimize ones tax, which is perfectly legal.
However since Oz has a tax system that requires you to disclose ALL income be it held in Oz or offshore, then unless you "cheat" and hide your ownership of the offshore Co then there is presumably no benefit.

This is a truely simple view, of course if you dealing with millions and or are actually operating an international business then there are other more case specific issues / benefits. I agree with Geoffw totally ... Lance Spicer is the man for this topic, his books cover all the angles and give some interesting historical examples.

You could also read through a free D/L book from Sovereign Group at : http://www.sovereigngroup.com/

Happy searching

 

[natmarie73]

Thanks Dave,

I did find this site, and have had a browse. Definately some interesting sounding books available which I will purchase (not only offshore investing either).

Nat

 

[natmarie73]

Patosan,

I was under the impression that offshore income is not taxed by Australia. I fully intent to declare any income derived from an offshore company (if it ever eventuates that is), but surely the ATO aren't able to tax me on it if it is earnt overseas and in overseas bank accounts?

Of course this is all speculative at the moment - all income is onshore at the moment but getting information for the future. I will have a chat with my accountant before doing anything of course otherwise as you said, what would be the point?

Cheers
Nat

 

[michaelg]

Hi,

The Oz taxman has a term called CFC (controlled foreign company) which implies that if you control it you own it, therefore the profits are yours to be taxed at Australian tax rates.

Just a thought
Michael

 

[Aceyducey]

surely the ATO aren't able to tax me on it if it is earnt overseas and in overseas bank accounts?

Nat,

So long as you're overseas too and not an Australian citizen or resident I can guarantee that you'll not be taxed by the ATO.

Cheers,

Aceyducey

 

[geoffw]

Having mentioned to Lance Spicer, not all will agree with his views. He's very keen on offshore because the government has eyes everywhere, and we need to do things which the government don't need to know about. Some of the views tend towards conspiracy theory- or Big Brother at a minimum.

He does have some interesting "High Risk High Yield" investment in one book. I was interested, but never went for anything. I discovered property instead

Like anything, consider the views, and make youw own conclusions.

 

[GreatPig]

but surely the ATO aren't able to tax me on it if it is earnt overseas and in overseas bank accounts?

As Rolf Harris used to say: sure can!

My understanding is that overseas income is taxed as if earnt in Australia, but with a possible credit allowed for tax already paid overseas. And they have rules to cover your using foreign entities as well - the CFC provisions already mentioned and transferor trust provisions if you're using a foreign discretionary trust.

But as always, get professional advice before wasting your time and money.

GP

 

[geoffw]

GP

That's my understanding as well.

If you make losses overseas, they cannot be offset against Australian income. And overseas unearned losses cannot be offset against overseas earned income. (ie- make a loss, and you may not be able to claim it. Make a profit and you get taxed immediately. I wish I had a business model like ATO's).

The big attraction for many in offshore accounts is hiding offshore income from Australian authorities. That hiding ability is either being undermined, or the ATO publicity is very good

 

[Baloo]

My understanding regarding overseas losses is a bit different to Geoff's. I believe that an overseas loss can only be applied against overseas earnings to reduce taxable overseas income.

Maybe Dale or Nick can give their professional view.

 

[geoffw]

My understanding regarding overseas losses is a bit different to Geoff's. I believe that an overseas loss can only be applied against overseas earnings to reduce taxable overseas income.

I don't express myself well. That was my intent- but I stated it in the negative.

Furthermore, overseas passive loss can only be applied against overseas passive income. If you got a job in the UK, you could not set off US real estate losses against it if you were being taxed as an Australian taxpayer.

 

[GreatPig]

If you make losses overseas, they cannot be offset against Australian income.

I think that depends a bit on the nature of the loss.

Most relevant to here, I believe if the loss is from loan interest and fees exceeding rental income on a foreign property, then the loss can be offset against other Australian income.

That is my understanding of the ruling covered in ID2002-764 from the ATO legal database (copy attached). There is a comment in there which says:

now excludes debt deductions to the extent they are not attributable to any overseas permanent establishment of the taxpayer

I take this to mean that the property can't be owned in a foreign entity, but I'm not sure if this is the correct interpretation of that statement.

GP

 

[natmarie73]

Wow! Thanks everyone.

What it seems to me is that there is no way around forking out 48 odd % tax unless I move permanently overseas or cheat. this leaves me confused as to why people buy property or invest overseas if they still get taxed on the income here, but can't offset any expenses. What's the point?

Also, how do people not pay the highest amount of tax here in this country ie Kerry Packer etc if they are still taxed on overseas income?

Nat

 

[DaveJ]

RE: Offshore investing

Hi,
Another reason people invest with offshore enitites is to 'get around' the strict Australian regulations. One of the sellling points Ed Burton and others use(have read their stuff not attended the seminar) is Australia has very strict and expensive financial 'hoops' companies/managed funds have to jump through before they can offer their products to Australians. And since Australia only represents about 3% of global wealth why would these companies bother to go through all the expense to get Australian creditation??? By using offshore entities you 'look' like you are not from Australia and these funds are willing to deal with you. (although there are dodgey funds i am also talking about $1Bn+ size funds) Some of these funds return >40% pa. (for many years)... $$$$$$

An example fund : http://www.squirrelyournutsoffshore.com/fact-sheets/quadriga-gctfuturesusd-factsheet.pdf
(for info only - not advice)

But yes you need to declare the money you make offshore in your tax return(could be done @ 30%??) Or keep it offshore and use it offshore... BASICALLY WHAT I HAVE HEARD - and I haven't tried this

Another reason: 'Hide assets from potential litigation although i guess you would by default have to also hide it from the ATO... NOT GOOD.


BTW A mail redirection service in Vanuatu for example would also get around the 'non-Australian' status allowing investment in offshore managed funds


Not for the average investor i have found through research....

DaveJ

PS... I guess if you are doing this you are not really going to discuss it in an open forum!! Sort of defeats the point!


some sites i found during research:
www.siiglobal.com
www.landausecurities.com/
http://www.landausecurities.com/view_funds.asp

 

[Kenny]

[snip]

Also, how do people not pay the highest amount of tax here in this country ie Kerry Packer etc if they are still taxed on overseas income?

Nat

Hi natmarie73,

Thanks for starting an interesting thread.

I'm guessing the answer would include in part:

1. Having a good team of experts around you eg. accountant, solicitor, broker, and partner. (my wife could be reading this! )

2. Using the appropriate structures for your wealth creation activities. eg. trusts.

With regards to the "why invest overseas?" the simplest answer would be to take advantage of opportunities in different markets, different taxation/legal regimes and that they may be in differing stages in the economic cycle. May be also to improve diversification and potentially manage currency risk.

Regards,

Kenny

 

[geoffw]

What it seems to me is that there is no way around forking out 48 odd % tax unless I move permanently overseas or cheat.

First of all, your primary objective is to earn the $$ in the first place. I'm sure there's lots of people who pay very little tax, who would be happy earning enough to be in the top tax bracket.

Second, there are ways of managing things to reduce taxable income. Properties with a lot of depreciation can help. Or a trust can mean that there's some things you are buying already in after tax dollars, which you can buy in pre tax dollars- a property buying trip as one example. See Dale's "Trust Magic" manual.

 

[GreatPig]

if they still get taxed on the income here, but can't offset any expenses

You can offset investment expenses against investment income, it's just that you may not be able to offset overall investment losses against other personal income, depending on how those losses have been incurred.

GP