Compare offshore accounts

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.

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going to need to provide the following documents: national ID, passport, a bank statement from which the funds will be withdrawn, and a statement about the source of those funds and the purpose for setting up the account.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. Offshore banks may have strict privacy policies, but that doesn't keep your account hidden from the tax office. Under the Common Reporting Standard, an international system designed to reduce tax evasion, Australia exchanges financial account information with other countries, so details of your offshore account may be shared with the Australian Taxation Office.
• 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 can pay a competitive rate (you can compare the current top rates in our guide), and while you may find 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. These figures date from early 2022 and haven't been updated since, so check each country's current interest rates, inflation and credit rating before relying on them.

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 if you're an Australian resident for tax purposes, you'll also need to declare that income in Australia, because residents are taxed on income from all sources, in or out of Australia. That can include 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?

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. Deposits held with banks outside Australia aren't covered by the Australian Government's Financial Claims Scheme, which protects deposits of up to $250,000 per account holder with each bank, building society or credit union incorporated in Australia.
• 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.

Frequently Asked Questions

• What is offshore in Australia?

  In Australia, "offshore" typically refers to financial activities or banking services that occur outside the country. Offshore banking allows individuals or companies to hold assets in foreign jurisdictions, often for reasons like tax benefits, asset protection, or diversification. Offshore accounts are legal but must comply with Australian tax laws and reporting requirements.

Written by

Shirley Liu

Publisher

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Shirley Liu is Finder's global program manager. She was previously the publisher for banking and investments and has also written comparisons for energy, money transfers, Uber Eats and many other topics. Shirley has a Master of Commerce and a Bachelor of Media, Journalism and Communications from the University of New South Wales. She is passionate about helping people find the best deal for their needs. See full bio