Let’s just hope this article finds the anarchist remnant out there, though the ATO is welcome… hee hee
You’ll find that most tax experts avoid talking in terms of ‘tax minimisation’ let alone ‘tax shelters’ and ‘tax avoidance’. Gone are the days of bank secrecy too and ‘foreign offshore trusts’ are only ever spoken or written for a qualified and filtered audience. These days it’s all about asset protection and transparency. If you are an Australian resident, I’m sorry to say but there are very few tax shelters left that will protect you from the ATO’s dirty finga’s and fudgy fumbs!
As an Australian resident you are obliged to disclose your worldwide income. It doesn’t matter if your renting out a house in Afghanistan or operating an Internet business in Seychelles the ATO wants a slice!
Now as the heading suggest, I’m but a humble student of Australian Tax Law. As far as I can tell the one piece of legislation that really determines whether you are an indentured servant or not is the Income Tax Assessment ACT 1936 and its subordinate regulations. Yeah trying going through that!
Surprisingly there is quite a fair bit of information on the ATO website, especially interesting are it’s case law studies and examples, reading these will give you a much better understanding of how the ATO applies the tax law and how it treats things like offshore accounts, foreign trusts and whether you are a resident or not then going through the actual legislation.
So if you are a PAYG wage earner you are essentially a serf (villeins) at the bottom of the fuedal pyramid. If you are a business owner it gets slightly better and you have some tools available to you which you can use to structure your tax affairs more efficiently, you could say business owners are the knights and one step above the serfs on the pyramid. Above the knights are the barrons… in our analogy this would equate to countries.
You see each country has their own unique tax law. Some levy very little tax and some like to take as much as it can get from their knights and in turn their serfs. The worse of the lot in developed countries has got to be America and its Internal Revenue Service (IRS). Since Australia is but a puppet of the US we love to copy what they do, so expect to see the same here. I should note however that while our tax system mirrors that of the IRS, the ATO hasn’t closed off all escape hatches.
Remember when I said “If you are an Australian resident…” well… what if you weren’t an Australian resident?
To be continued in future posts!