It never ceases to amaze me the number of people that are ripped off with sham investments and get caught up with unworkable offshore strategies. Some of you have probably heard of all the usual scams such as Nigerian Letter Scams, Ponzi schemes, and Pyramid selling schemes etc, there are a "million" of them. These schemes operate predominantly outside of Australia which makes the job of getting your money back or stopping the operators almost impossible. In addition, there are is an "industry" in offshore trusts and companies developing whereby investors and business people are offered offshore "entities" at what are perceived to be bargain prices. Some of the prices I have heard of, are as much as 10 times the normal real price. Offshore companies cost from  $ 500, and setting up an offshore bank account usually costs nothing! Of course, there are on-going yearly fees as there would be with any company.

Many offer offshore trusts and the promoters tell people that they will never have to pay tax again. However, they leave one vital piece of information out of the sales pitch, and that is they have to technically break the law to achieve these tax breaks. I have spoken at length to fellow accountants, solicitors and incorporation agents over the years and we have all come to the same conclusion, they often don't work and they are not legal because of the way they are setup. I have been involved with Australian taxation for 20 years, it has been a big part of my professional life as an accountant and I cringe when I here what some people have been told. They are told that if you set up an offshore "entity" , you don't have to pay tax anymore because you just put all your local business dealings through the offshore company and bank your money offshore - Result? No tax!...Wrong, this is illegal and you could end up in jail if the numbers are big enough. Advice like this is always passed on to the unsuspecting person by a "sales person", never an accountant or solicitor. Before committing yourself to any of these "schemes", check with your accountant or solicitor first.

Having said that, an offshore company can be very useful for investing in offshore investments that would normally never be available to a "normal Australian". They can also be very effective for deferring or minimising tax if set up and used correctly and legally. Most big public companies have offshore corporations that they use for tax planning and minimisation. The average person can also use them as asset protection vehicles which can safeguard your assets against litigation in many instances. Privacy and confidentiality is also a major reason for people setting up offshore companies. These "tax haven" countries protect your financial privacy with legislation that other countries can't penetrate no matter what they do. Unfortunately, Australia has no such privacy laws, John Howard decided to not introduce privacy laws. Offshore asset protection is very popular with Americans due to the amount of litigation in small business over there, it would appear that we're going the same way in this country.

As the world "globalises" the offshore corporation and bank account will become very common in Australia as it is in the US, UK and Europe. Offshore banking can also be used to great advantage with higher interest rates being offered by most major banks when compared to Australian banks. Offshore banking also offers you the advantage of currency diversification which can be a blessing sometimes when you see how poor our dollar has performed over time. I wish had had all my money in US dollars 10 years ago, I'd be laughing now even if it had been sitting in a bank account at 5% per annum. Another misconception is that banking offshore, investing offshore or owning an offshore company is illegal, it's not. You can invest your money anywhere in the world in anything you like, there are no restrictions.

We all know that a well known media magnate was able to reduce his tax bill by $ 40,000,000 using offshore corporations, and he did it legally. Now, I'm not suggesting for a minute this is what you should be doing because the structure he used was very complex and costly to establish, but there are things you can do with offshore corporations, offshore investing and banking, to great advantage and legally as well.