No beaches, no tax where Tinkler's going

Power Index

There's a few things 36-year-old coal billionaire Nathan Tinkler will miss when he moves to Singapore: the surf at Newcastle, our wonderful beaches, and not being able to drive faster than 90km/h in his fleet of Ferraris, or his Bugatti Veyron.

But the pain of his loss will surely be salved by paying little or no tax. Won't it?

The maximum personal tax rate in Singapore is 20 per cent, or less than half what it is in Australia; there is no capital gains tax, which should pay dividends, because the $915 million Tinkler has made since 2006 has been from buying and selling shares; and best of all, if he's in Singapore for more than half the year, or 183 days out of 365, he will pay no tax at all on his foreign income.

Tinkler has already sold one of his Newcastle residences at a knock-down price, exchanging sale contracts at breakneck speed. He has also had his PR man Tim Allerton tell the world he is taking his family to Singapore for keeps. So, on the face of it, he should be able to escape paying Australian tax as well, provided he's not in the country for more than that magic 183 days.

So will he pay any tax at all? Remarkably, it seems, he will pay just as much as if he stayed in Australia, if that's where the deals are. And he may even pay more.

According to a top tax lawyer contacted by The Power Index this morning, non-residents can't escape Australian tax if they're buying and selling Australian land, which is what Tinkler is almost certainly doing when he buys and sells shares in coal mines and coal companies.

As a non-resident, he will also lose the concessions you get on CGT by holding the assets for more than a year.

What's more, there appears to be no way for him to escape tax by setting up a string of foreign companies (like Alan Bond used to do) so that the profit lands in some exotic tax haven. That apparently won't wash.

Currently, Tinkler is talking about the biggest deal of his life, privatising Whitehaven Coal at the bargain price of $4 billion. But even if he can achieve this, and flick it on at a profit in 18 months, he'll still have to leave 45 per cent of the money on the table for Australian taxpayers. He won't be able to make a squillion out of the nation's mining wealth and cart the money offshore.

In the long run, he may well be able to avoid hundreds of millions of dollars in tax by basing himself in Singapore, but only if he trades assets other than land and/or looks outside Australia for his deals.

It's nice to know our tax system works.

This article first appeared on The Power Index on June 14. Republished with permission.