The Tax Implications of Offshore Trusts - Returning to Australia
Different employers have varying remuneration structures which most effectively suit their policies and employees. In some countries - and this has previously been the case with expatriates working in the UK - it has been relatively common for some part of an employees or consultants remuneration to be provided by, or routed through, an offshore trust (often referred to as an "Employee Benefits Trust").
More often than not these are legal, tax effective vehicles in the foreign jurisdiction. However, when an individual enters Australia there can be severe tax consequences if you continue to hold an interest when you again become an Australian tax resident. We strongly recommend that Australians returning to Australia with any sort of residual interest in an offshore fund - or indeed company - seek specific tax advice well in advance of their again becoming an Australian tax resident.
The need for advice well in advance, apart from the greater flexibility it provides, is prompted by the fact that some provisions with Australian tax legislation provide that trust distributions made before you have even returned to Australia may need to be included in your assessable Australian income if you received the distribution within the Australian tax year of income. This can potentially result in large tax bills and possible double taxation.