Asset Accumulation Phase

P

petey

Active Member
Silver Stacker
I've read NR's writings and to be honest know little about companies/trusts etc.

During the Asset Accumulation Phase of one's lifetime, would it make sense to register a company in a no or low tax country and buy assets in that companies' name?

As far as I see it, if early retirement is your goal you are better off deferring the tax for the future when you need the income. For the next x years while you are still working, your person doesn't want to see the income from your investments at all as you will be taxed on that income.

Am I barking up the wrong tree or is this worth looking into?
 
petey - my personal take is an investment decision should never be driven by the tax benefits. Plenty of people in Aus have been hit hard by forestry type schemes that promised upfront tax deductions that turned out to be massive duds (then the ATO retrospectively denied the deductions but that is another story).

While buying assets in another low/zero tax jurisidiction might seem sensible there are plenty of other considerations to take into account such as foreign currency risk, legislative risk (rules change - ask the Cypriots), actual control of the assets (assume would require third party management = agency risk).

Of interest perhaps - the building materials company, James Hardie, has spent a large fortune over the last decade trying to relocate their head office to the Netherlands to save on tax only to eventually fail and get stung with extra tax anyway on top of the costs of relocation AND fighting the Netherlands tax authority. Last I heard they were trying to relocate their head office to the US! This is a company with access to a lot of smart people and they turtled it up badly.

If you know little about companies/trusts, then with all due respect, this may also be well out of your league. Not to say it can't be done of course.

While tax deferral is no doubt desirable if possible, a productive investment is more important in my humble opinion.
 
boyracer said:
petey - my personal take is an investment decision should never be driven by the tax benefits. Plenty of people in Aus have been hit hard by forestry type schemes that promised upfront tax deductions that turned out to be massive duds (then the ATO retrospectively denied the deductions but that is another story).

While buying assets in another low/zero tax jurisidiction might seem sensible there are plenty of other considerations to take into account such as foreign currency risk, legislative risk (rules change - ask the Cypriots), actual control of the assets (assume would require third party management = agency risk).

Of interest perhaps - the building materials company, James Hardie, has spent a large fortune over the last decade trying to relocate their head office to the Netherlands to save on tax only to eventually fail and get stung with extra tax anyway on top of the costs of relocation AND fighting the Netherlands tax authority. Last I heard they were trying to relocate their head office to the US! This is a company with access to a lot of smart people and they turtled it up badly.

If you know little about companies/trusts, then with all due respect, this may also be well out of your league. Not to say it can't be done of course.

While tax deferral is no doubt desirable if possible, a productive investment is more important in my humble opinion.
Click to expand...

This post is pure gold. Petey admits he knows little about trusts. The golden rule is you never never invest for the tax deferral benefits as the primary focus. That is just the icing on the cake.

The other point is you are a long way away. Multi billion dollar Australian companies as the example above have lost billions getting into investments that were driven by tax.

Plenty of tax deferred investments in Australia to play with

Kind Regards
non recourse
 
boyracer said:
If you know little about companies/trusts, then with all due respect, this may also be well out of your league.
Click to expand...

Well agreed that I have much to learn, however remember that I am merely asking an initial question before going down the track of researching something that may well be a waste of time as it's not feasible.

I'm not suggesting investing in Panamanian Oil Futures. I'm talking about registering a company in eg. British Virgin Islands and using a Singapore, Hong Kong, etc bank account in that Companies' name, investing in the exact same shares/property/etc that you could do in your own name.

Whether or not the investment is productive is irrelevant, as the same investment could be made either personally or through the company - the only difference is the ownership of that investment.
 
Petey I had a bank account in the Channel islands way back in the late 1970's when I was working in Saudi Arabia. I had physical gold bullion that the bank stored for me in a safety deposit box and I had a U.S. dollar call bank account. As part of the tax laws in order not to be liable for Canadian income tax in those days I had to have an overseas account and no assets in Canada.

When I moved back to Australia the Channel Island bank contacted me. It was going to cost me thousands in bank charges unless I had a minimum $1 million. They didn't want my business because back in those days if you didn't have a minimum $ million... so I'd hate to think what it is today.

Like you I have explored setting up an offshore account in recent years but as the bulk of my assets are in property it makes no sense. I would think if there was a bail in the overseas banksters would have an even easier time of stealing your stash.

As to whether the investment is productive...mate its the golden rule preserve your initial capital. That is why bullion should only ever be used as a hedge to protect your income producing assets.

Its good your thinking and no one who has posted on this thread is knocking you about your idea. :D


petey said:
boyracer said:
If you know little about companies/trusts, then with all due respect, this may also be well out of your league.
Click to expand...

Well agreed that I have much to learn, however remember that I am merely asking an initial question before going down the track of researching something that may well be a waste of time as it's not feasible.

I'm not suggesting investing in Panamanian Oil Futures. I'm talking about registering a company in eg. British Virgin Islands and using a Singapore, Hong Kong, etc bank account in that Companies' name, investing in the exact same shares/property/etc that you could do in your own name.

Whether or not the investment is productive is irrelevant, as the same investment could be made either personally or through the company - the only difference is the ownership of that investment.
Click to expand...
 
petey said:
Well agreed that I have much to learn, however remember that I am merely asking an initial question before going down the track of researching something that may well be a waste of time as it's not feasible.
Click to expand...

Even if it turns out that that kind of arrangement isn't viable for you right now, would the time you spent researching it really be wasted?
 
petey said:
boyracer said:
If you know little about companies/trusts, then with all due respect, this may also be well out of your league.
Click to expand...

Well agreed that I have much to learn, however remember that I am merely asking an initial question before going down the track of researching something that may well be a waste of time as it's not feasible.

I'm not suggesting investing in Panamanian Oil Futures. I'm talking about registering a company in eg. British Virgin Islands and using a Singapore, Hong Kong, etc bank account in that Companies' name, investing in the exact same shares/property/etc that you could do in your own name.

Whether or not the investment is productive is irrelevant, as the same investment could be made either personally or through the company - the only difference is the ownership of that investment.
Click to expand...


petey - yes I understood that which is why I was trying to be as general as I could.

So say for example you were wanting to buy Australian shares from an offshore base. Foreign investors do not get the benefit of franking credits so if you owned bank shares then 30% of the gross income is lost straight away. Withholding tax may also apply although I've not looked at this for a while so no doubt it has changed and some countries do have exemptions/reciprocal agreements etc.

Attempting to own Australian assets in an offshore entity is a pretty fraught exercise, a tax haven even more so. I know people that do it but it costs them a small fortune to do so and is only worth it as the savings on offer are higher. Even then they are skirting the edges of tax law. Do you like sleeping? Be prepared to get a lot less.

If however you wanted to own foreign assets in this low/zero tax jurisdiction then you instantly run into fx/agency/sovereign risk at a minimum.

I don't want to discourage you from doing research at all - it is never wasted and who knows what you might find. I do want you to go in with open eyes and low expectations - to not to get sucked into something you shouldn't. My suggestion would be to generally invest in a jurisdiction with which you are more familiar (tax/legal/culture/economic prospects) and have better access to ie. your home country - control is an often overlooked commodity when the SHTF. What you are looking at requires some very specialist advice in my opinion.

At the very least you have got NR and me in agreement on something. So this thread was not a total waste eh? :D
 
One resource that might be useful is www.sovereignman.com. There is a premium service which guides you to other places in the world to invest. He also provides alternatives to creating wealth in your second passport country. Look through his website articles and you'll see a range of options.
 
Kawa said:
Do you have a SMSF Petey?
Click to expand...
Nope, that is literally on my list of things to do for next week now that the holiday season madness is out of the way.
 
petey said:
Kawa said:
Do you have a SMSF Petey?
Click to expand...
Nope, that is literally on my list of things to do for next week now that the holiday season madness is out of the way.
Click to expand...

If you message me I can give you the name of someone who can set up your SMSF properly. Over 90% of all new SMSF's being set up have the individuals as trustees rather than a corporate trustee. There are many good reasons to have a corporate trustee.

http://www.asic.gov.au/asic/asic.nsf/byheadline/Special+purpose+companies?openDocument
 
You must log in or register to reply here.
Back
Top