Bag of tricks - where a haven comes in handy

Debt loading

Debt loading

The parent company loans money to its Australian subsidiary via an offshore finance arm based in a low-tax jurisdiction. The Australian operation then pays interest on the debt, which is tax deductible, rather than dividends, which are not. Thin capitalisation rules - strengthened in the latest budget - limit the amount of debt that can be used to fund Australian operations.

Transfer pricing

The parent company sells its products to its Australian subsidiary at an inflated price, often via a subsidiary based in a low-tax jurisdiction. This means the Australian arm makes negligible profit on the product it sells and the profit is essentially shifted to another part of the company.

Intangible assets

The parent company houses its intangible assets - such as intellectual property or licences - in subsidiaries in low-tax jurisdictions. Its Australian operations then pay the tax-haven-based subsidiaries to use those assets.

Offshore billing

The parent company charges Australian customers for services using an offshore subsidiary based in a low-tax jurisdiction. Because the money goes directly from the customer to the tax haven it does not form part of the Australian arm's income and is never taxed here.

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