I have an income from overseas. This income is in the form of a business transaction. ie not ongoing wage, a on off payment.
Is their a way I can avoid tax on it for Australian purposes?
I have been informed from different sources to set up a company in the British Virgin Isles, place the funds with this company, then the company lends back to me here in Australia.
This method was suggested due to the fact of the secrecy laws in this juristiction.
Is this correct?Also another option – due to secrecy laws was place the funds into an Swiss numbered account.
However, as I realise, if you make income worldwide it is taxable here in Aust. And also, that Aust. has tax treaties with over 40 countries,including Swiss and I’m assuming BVI as they are part of the commonwealth.
With these treaties etc. can the ATO still audit or access these bank accounts/companies in these areas for tax purposes or are they truly secret and untouchable?
If the answer is no – they can’t access, then the risk being undertaken is declaring your income, come tax time,correct? As,you must disclose all income – worldwide, correct?
If this is the case – then you could be liable for fraud, correct? Especially, if someone notified the tax department?
And, if this is correct, I would rather pay the tax(or get a great accountant who can write off the tax).
I am correct in what I have stated so far or does anyone know some alternatives?
Is your foreign income taxed in that country ?
If so, you may be able to avoid double tax. Australia has a number of agreements in place with other countries to handle this.
Contract,
If the payment is for payment of services or “personal exertion” and you are an Australian Resident for tax purposes then you are assessed on income from all sources (regardless of where the income is earned). You should consult a good accountant and determine whether the income is covered by Australian taw laws.
Let’s assume that it is and you haven’t paid tax overseas and the country is not party to a double-tax agreement (see your accountant about this). Yes you can shift the money to an offshore account (Guernsey, Channel Islands, Jersey, Cayman Islands, Vanuatu are all popular offshore banking destinations). However the ATO has taken an interest in offshore arrangements and if you “loan” the money back to your company then the ATO is going to ask “where did the funds originate from” and want some damn good answers.
A lot of people have also transferred funds to offshore accounts, setup a credit card in the offshore account and then used that credit card for purchases, etc. The tax office has taken a keen interest in this area and is currently auditing a number of tax havens and requiring people to explain funds held offshore.
Even if the offshore tax haven is one that is generally not co-operative with the ATO (and the British Isles tax havens have been very complying so a good chance you will get caught if using one of them) then they can look at your expenditure patterns and ask some reasonable expenses. e.g. if you recently purchased a Porsche (easy to trace through registration of your vehicle) and you have an assessable income of $50K then the ATO will want to know how you are going to support the lease payments or how you managed to pay cash for the item.
My personal advice is to pay tax on this income and not try to avoid tax. It is fraud and heavy penalties and goal sentences can apply.
Finally a “great accountant” does not write off tax. They will assist you in determining your assessable income, allowable deductions and ensuring that you pay the correct amount of tax. They will assist you in legally minimising your tax. If however you have few allowable deductions and you have not setup a tax friendly structure (e.g. a family trust) then they can help you in future planning but they will not assist you in obtaining a refund where one is not due or write off the tax. It is a common misconception that the “best accountants” will get you the greatest deduction. It all depends on your circumstances, record keeping and structures.
contract,
As you have now made the comments public I suggest you do the right thing.
Do you think that the ATO doesn’t monitor forums to look for people who are doing dodgy things!
There was recently quite a big scandal in Australia with some prominent people who were hiding money in swiss bank accounts. They got caught.
Talk to a good accountant & discuss some tax minimisation strategies.
Cheers,
Aceyducey
In theory, there is no difference between theory and practice. But, in practice, there is.– Jan L.A. van de Snepscheut
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