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 there is a 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 offshore banks - whether Australian or foreign - usually offer poor cash returns compared to those available onshore in Australia. Additionally, they may be more secure, if it is with an authorised deposit-taking institution (ADI) it may attract Government deposit protection of up to $250,000 per account-holder - discuss this with the bank.
As an example, consider the table below which compares the interest rates available in May 2021on a term deposit of AUD50,000, and note that the margin differentials are atypical - they are often considerably larger in favour of Australian domestic deposits, but this is an historically low interest rate environment.
| Interest Rates : AUD100,000 on Term Deposit for 12 months Interest paid annually : May, 2021 Domestic Rates vs. Offshore Asia Rates |
|
|---|---|
| Westpac |
0.25%
|
| CBA |
0.20%
|
| NAB |
0.25%
|
|
|
|
| DBS Singapore |
0.00%
|
Previously, we had contrasted domestic term deposit rates with those offered by ANZ in Singapore. However, typical of Australian banking's commitment to our largest trading market, ANZ sold their wealth and retail banking businesses in Indonesia, China, Hong Kong, Taiwan and Singapore to DBS Bank at the end of 2017. We now include a comparison with the rates offered by DBS.
In any event, a detailed comparison should be made before committing your funds, and if your cash amounts are very substantial we would suggest contacting us to arrange appropriate financial planning advice.
If you would like to arrange professional advice please complete the Inquiry form below providing details and you will be contacted promptly. You will receive a fee quotation in advance of any advice or services being provided.