What is an offshore account?
An offshore bank account is a personal or business account held in a country outside of Australia. The benefits of offshore banking can include more privacy, easier access to foreign currencies or financial products not available in Australia, and potential tax minimisation opportunities.
The downside is that managing it all can be complicated. Offshore accounts are not illegal, but failing to properly declare overseas income is. Tax specialists and other financial advisers can help you utilise your offshore account, and navigate tax law, but other tools are also useful.
- International financial institutions can help facilitate overseas banking.
- Multi-currency bank accounts can be an effective way to hold multiple currencies.
- International currency transfers are a preferable way to send money overseas and convert currency, with lower rates than bank transfers.
Disclaimer: The products displayed on this page represent only Australian financial institutions that facilitate offshore banking.
How can I open an offshore bank account?
Each bank will have its own account opening process. With most you are going to need to provide the following documents: national ID, passport, a bank statement from which the funds will be withdrawn, and a statement about the source of those funds and the purpose for setting up the account.
There can also be additional requirements to meet before you apply, such as being able to maintain a certain amount of funds, having a certain income, and having an existing account in your home country.
How to apply for an offshore account
Because the bank account you are applying for is based overseas, you will generally be unable to apply for an account in person. The best way to apply is online. Some banks may call you once you've filled in an online form to express your interest.
Processes may differ based on the institution, but one example of an application process is:
Step 1: Fill out the relevant application forms and gather required documents.
Step 2: Scan the form and documents, and email them to the bank.
Step 3: Your application will be reviewed and the bank will be in touch with any questions.
Step 4: Once accepted, it will be passed on for compliance checks.
Step 5: You will receive your bank account information, including details on transferring funds.
Step 6: You may need to send other physical documents and proof of money transfer.
How can I compare offshore accounts?
Comparing offshore accounts requires that you take certain factors into consideration that you don’t need to consider with your standard bank account:
- Tax environment. An offshore bank account is usually set up in a country that has a lower tax rate on investment income than in Australia, or on any interest earned through the account.
- Confidentiality. One of the biggest advantages offered by an offshore bank account is its privacy policies and unwillingness to divulge clients' details to third parties.
- Accessibility. If you want easy accessibility to the funds it holds to make quick investment decisions, it's worth noting that not all accounts will allow for easy access to various investment products, such as forex, so you first need to consider where you will be making most of your investments.
- Savings account. An offshore account should work as a savings account, paying you interest on the balance. Check to see what the interest rates offered are.
- Multi-currency availability. When you bank with an offshore account, you are going to want to make sure that it has the capability to deal with multiple currencies.
- Global transfers. Moving money from one account to another globally is very important with an offshore account. Learn more about international money transfers.
Compare interest rates around the world
It's important to not only compare interest rates, but understand them. A high interest savings account in Australia might give you interest rates of about 3-4%, and while you can get considerably higher returns overseas, it comes with additional risk.
You should consider factors like inflation, the country’s current political climate, what kind of risk level you’re interested in and the foreign exchange fees which may apply when you want to convert your funds back into Australian dollars.
- Interest rates. Higher interest earned is generally preferable, but should be compared with other information.
- Inflation. Lower inflation can mean higher value returns, and high inflation may detract from the value of your investment.
- S&P rating. The Standard & Poor’s long term credit rating for each country is a reflection of the country’s current economic climate and financial stability. AAA grades are the highest rating, indicating a very stable economy, BBB grades are riskier, and anything below that may be regarded as fairly speculative and high risk.
The information below was taken from various sources and is intended to be used for comparison purposes. While care has been taken to keep information accurate, it may not be up to date at the time of reading and you should not base investment decisions on this alone. Note that interest rates, inflation and credit ratings will change over time, and can also change abruptly.
World interest rates
Compare interest rates, inflation and credit rating in Australia’s 20 most popular overseas investment destinations, and in Australia.
|Country||Typical interest rates||Inflation in March 2022||S&P credit rating|
|Cayman Islands||6.40%||AA3 Moody’s Credit Rating|
|Papua New Guinea||3.00%||5.70%||B-|
How else can I benefit from offshore accounts?
Higher returns. Even if your key consideration is tax minimisation strategies, your interest can still be considerable. It may be worth comparing the returns available from overseas term deposits and interest-earning savings accounts. Planning ahead and considering the long-term when opening an overseas term deposit can benefit you even more. For example, a company with a 5-year plan to do business in South Africa might open a South African Rand (ZAR) 5-year term deposit account, to simultaneously earn interest and prepare its overseas finances.
Foreign currencies. If you make a lot of overseas transactions, being able to avoid currency exchange fees is as good as money in your pocket. Holding an interest-earning offshore account, in a currency that suits your needs, may be preferable even if the interest is lower than in Australia.
Offshore accounts for tax minimisation
Offshore account tax minimisation is often the result of having different tax rates in Australia and elsewhere. You will need to pay tax in line with the local laws in the country of your offshore account, and may need to pay tax on that income in Australia as well, including capital gains tax on investments, and tax on interest earned from overseas savings accounts. Differences in Australian and overseas tax laws mean it may not be a direct "translation", and you may experience effects such as ending up in a different tax bracket.
It's a good idea to use financial advisers, particularly tax specialists, to help you. In particular, an expert may be able to ensure that you aren't breaking any laws.
What are the pros and cons to having an offshore account?
- Lowered taxes. This is one of the main appeals to investors who are looking for an account to use for their investments.
- Foreign investments and products. An offshore account can provide a range of investment and other banking products that are not available in Australia including: bonds, stocks brokerage, foreign exchange, investment funds, equity-linked products, mortgages and lending, and insurance.
- Online accessibility. With an offshore account you typically have access to the following online: savings account, multi currency account, term deposit and global fund transfers.
- Hard to apply. Due to local restrictions and requirements, it may be difficult to apply for an offshore account.
- Fees. You could be charged higher fees for the advantage of having your money in an offshore account.
- Acquisition. Obtaining an offshore account will not be as easy as setting up an investment account in Australia. You might need to provide identification documents that have been verified using an Australian apostille's stamp.
What are the risks?
There are some risks with keeping money in offshore accounts. Be aware of the following before considering this type of account to handle your finances:
- Regulations. There are laws in place for Australians who hold funds in an offshore account. You should familiarise yourself with those rules and regulations before opening an account.
- Security. Your deposits are not necessarily protected the way they would be with the Australian Government Guarantee scheme.
- Accessibility. The cost of opening and maintaining an offshore account can be costly, prohibiting those with lesser incomes from establishing one. There are some simple savings accounts available for Australians offshore, but they do not provide the same types of advantages as an offshore account for investment purposes.
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