Onshore vs. Offshore Returns - Cash Deposits
A question which often arises is whether to place excess cash in an Australian or offshore term deposits. There isn't a simple answer because the situation is dynamic and you need to review your situation regularly. However, it is wrong to simply assume that offshore deposits offer better terms simply because they avoid the payment of the 10% withholding tax (WHT) applicable to interest earned in Australian by non-residents. In fact, the pattern apparent over the last decade is that Australian banks offer poor returns offshore compared to onshore in Australia
As an example, consider the table below which compares the interest rates available in July, 2017 on a term deposit of AUD50,000, and note that the margin differentials are typical - and often increase in higher interest rate environments
In the example above it is clearly in the interest of the bank customer to have the funds placed on deposit in ANZ Australia rather than ANZ Singapore. Note also that ANZ Singapore has a provision that Signature Priority Banking customers will be charged a SGD 50 fee every month (c. AUD45 per month) in which the Total Relationship Size1 falls below SGD 150,000. Total Relationship Size includes deposits, investments and/or insurance.
In any event a detailed comparison should be made before committing your funds, and if the amount is substantial we would suggest contacting us to arrange financial planning advice.
The above picture is not unusual and we continue to hold the view that there is much more that the Australian banks could do overseas to make themselves relevant and competitive providers of banking services to a wider base of Australian expatriates.