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Going Offshore for Asset Protection in Australia.

Article by WealthSafe.

Date Published: 20 Feb 2014

As governments clamp down, it’s becoming harder and harder for asset protection in Australia.

It should be every sovereign citizen’s right to protect their wealth. Yet governments through the Bankruptcy Act, and putting the fear of God into lawyers, as well as courts enforcing the will of the government (even though they’re meant to be constitutionally independent) are taking away rights bit by bit. Allowing every golddigging predator to get their hands on your wealth.

In the Roman Empire the same thing happened hundreds of years ago. As Rome’s financial economy started to collapse, and taxes become exhorbitant, people started siphoning money out of Rome into other countries. The Roman government didn’t like it. So they passed laws to make it more difficult … then to stop it … imprisoning and committing atrocities on citizens who dared to protect their wealth!

“There’s nothing new under the sun”, the book of Ecclesiastes says in the good book.

In Australia, it is harder to protect assets now. Cases like Richstar Enterprises Pty Ltd v Carey (No 6) [2006] FCA 814 show the changing approach of the courts. ASIC wanted to appoint a receiver to Norm Carey’s family trust assets. Norm Carey of course argued that it was a trust and nobody owned anything. However, Justice French agreed with ASIC that Norm Carey and co had a contingent interest in the discretionary trusts as in reality, they controlled the trust.

He gave 3 situations where a receiver may get an order to cover “expectant interests” in a trust so that it would be considered “property” under Section 9 of the Corporations Act.

1. A Trust where the defendant is a beneficiary, and a director and secretary of the corporate trustee and the trust confers a discretion to distribute to targeted beneficiaries to the exclusion of others (a discretionary trust).

2. A trust where the defendant is a trustee and beneficiary where the defendant had the discretion to distribute at least 39% of income or capital to a targeted beneficiary.

3. A trust where the defendant is a beneficiary and the defendant also has the power to remove or appoint trustees ie. (a principal or guardian)

That said, it was an interlocutory decision that gave it less weight, and also, subsequent court cases have narrowed its interpretation, eg. Smith Public Trustee v Smith [2008] NSWSC 397 (NSW Supreme Court decision). Nevertheless, this case, along with the 2008 High Court decision in Kennon v Spry, it shows the growing tendency of the courts to follow a more communistic way of thinking, and take the wealth from private people and give it to the government, or someone suing it.

Certainly … it’s one of the reasons why going overseas can be a far better way to protect your assets and privacy.

Now when talking about offshore, I am not talking about anything dodgy. Thanks to Operation Wickenby and government propaganda, there is almost a sense of “wrongdoing” or “wickedness” when that word is mentioned! However, offshore is really just anything overseas … if you buy shares in Microsoft you are investing offshore. If you buy US property and have a US LLC to hold it (a common strategy by Australians since the US property crash), you have an offshore structure and are investing overseas!

So … it’s important to get rid of the myth that the ”offshore world” is only for the rich and famous, and is too complicated for the average person. There are many 100% legal reasons to go offshore, including better asset protection, tax benefits, simplicity of paperwork, etc. The only illegal thing is you can’t structure offshore to illegally avoid or evade tax.

Both the Bankruptcy Act and the Tax Act give a lot of protection. Under the Tax Act, if you are being audited, and have an offshore company, they cannot force you to produce documents … only give you an “offshore information notice” asking you for information. If you refuse, they can’t make you do it. They can only stop you from ever using the documents in a court of law in the future. And similar provisions exist under the Bankruptcy Act.

Pretty powerful for sure. Now I am certainly not promoting tax evasion or avoidance … far from it! The government with treaties and information agreements can get information on your structure with most countries if they work hard enough.

But gold-digging predators looking to get a slice of your wealth will find it a whole lot harder.

Brisbane Lawyer, Bruce Sockhill, also agrees that for asset protection is best done offshore. He argues an International Business Corporation (IBC) or a Foundation or a simple Offshore Trust gives as strong protection as anything, and I agree with him. British Virgin Islands company structures, or Panama foundations, are legendary for their privacy, and the difficulty in prying governments getting access to information or assets in these structures.

Bruce Sockhill gives 4 reason why he believes going offshore is a good way to go:

1. Asset Protection – by having assets in a different jurisdiction, it is harder to get to them. Governments and people suing you have to get court orders to get in. Most people suing or wanting money from you want it easy, and at minimal cost. Once they start having to spend huge amounts of money on lawyers in Australia and overseas, and get court orders, a potential cash windfall for them is far less attractive. It is like a car with a sophisticated alarm system and one that is not. The car thief will usually target the latter so he can get the car and drive off.

2. Privacy – Australia are passing all these insane privacy laws from 1 March. Not just that but banks will give anything up at the drop of a hat. Someone suing you will find it a far harder proposition to get information from a foreign bank, say in Labaun Malaysia, or Hong Kong. Again it becomes far less attractive, and you can keep some privacy to your affairs, like most of the rich and wealthy do.

3. Tax Minimisation – By earning income offshore through a separate entity, you may be able to minimize tax. Mind you, you do have to be careful here, and not doing anything illegal. However, treaties do allow certain tax minimization in Australia if done properly.

4. Access World Markets – By going offshore with your business, you can access worldwide markets and substantially higher returns in investments that may not be available domestically, and with much greater privacy.

I will give a 5th reason. Minimise compliance. For example, if you employ Australian workers, you have high award wages, superannuation, workers compensation, all kinds of leave, etc. If you outsource and contract overseas, if done properly, you will have none of that.

One warning. Don’t go offshore and do it cheap on the internet without proper advice. Going to jail, or ending up in major trouble with the government or anyone else is not worth it. And if you do it wrong, that can certainly help. Just google and read Operation Wickenby if you don’t believe me and think I’m just trying to scare you.

In summary, going offshore is not difficult to do. It is the way you do it, and making sure you get the right experts to help you.

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