The Tax Implications of Offshore Trusts

Different employers have varying remuneration structuring which most effectively suit their policies and employees. In some countries - and this is particularly the case with expatriates working in the UK - it is common to have some part of your employment remuneration provided for, or routed through, an offshore trust (eg. 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 still hold an interest in such an entity. We would urge Australians returning to Australian with any sort of residual interest in an offshore fund to seek tax advice well in advance of their return to Australia.

The need for advice well in advance, apart from the greater flexibility it provides, is that some provisions with Australian tax legislation provide that trust distributions made before you have even returned to Australia may be included in your assessable Australian income if you received the distribution within the Australian tax year of income. This can result in large tax bills and possible double taxation.

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