Holding Cash Offshore or in Australia
Onshore vs. Offshore Returns - Cash
A question which often arises is whether to place excess cash in 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 presume 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.
As an example, consider the table below which compares the interest rates available in March 2009 on:
1. New term deposits made to ANZ Singapore exceeding AUD250,000 and
2. Term deposits of between AUD50,000 - AUD99,999 made to ANZ Australia
3. ANZ Australian interest rates adjusted to reflect a 10% withholding tax (WHT)
|
|
ANZ Singapore | ANZ Australia | ANZ Australia (less WHT) |
|---|---|---|---|
|
1 Month
|
3.10%
|
2.35%
|
2.12%
|
|
3 Months
|
3.00%
|
4.00%
|
3.60%
|
|
6 Months
|
2.88%
|
3.60%
|
3.24%
|
|
12 Months
|
2.80%
|
3.40%
|
3.06%
|
Even allowing for the fact that:
- the Singapore rates are introductory rates, and therefore existing terms deposits would probably attract lower rates
- the Singapore rates are for substantially higher amounts, and slightly hgher rates are probably negotiable in Australia, and
- withholding tax is not a bank cost
- in most cases it was clearly in the interest of the bank customer to have the funds placed on deposit in ANZ Australia rather than ANZ Singapore.
The above picture is not unusual. 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 most Australian expatriates.
IMPORTANT: The material contained in this website and other associated communications is only intended as general, background information and must not be relied upon. No warranty is provided in relation to any material or to the services that may be contracted through exfin.com. It is recommended that individuals seek the advice of qualified professionals before taking any action.
