The priority for Parliament should remain pinging the big tax culprits – foreign-controlled multinationals.

It would be unusual if anybody as wealthy as Malcolm Turnbull did not have some connection with the Cayman Islands.

Most rich people have investments in hedge funds and most of the larger hedge funds have entities in the Cayman Islands and other tax havens of the Caribbean.

He had future political aspirations and didn’t want any tax skeletons in his closet.
– Eugene Wong

There is nothing more sinister about the Prime Minister’s Caribbean investments than there is about those of the Future Fund. The Future Fund, in its disclosures last year, showed no less than 43 tax haven entities, 35 of which were domiciled in the Caymans.

The point of being in the Caymans is not so much about hiding things – you would go to the British Virgin Islands for that – as it is to avoid double taxation. “The story of Malcolm’s Cayman investments is a beat-up,” hedge fund manager John Hempton told Fairfax Media. One of the PM’s investments is with Hempton’s Bronte Capital. “In the post 9/11 world, banking secrecy changed. These days you are allowed secrecy or banking but not both.

“The Caymans opted to become a banking centre. Australia has information sharing arrangements with the Caymans. I assume that Turnbull pays tax [capital gains tax and income tax] in Australia on these investments. This is normal.”

Elsewhere, like any rich guy, the Prime Minister has a diverse investment portfolio. It is diversified by asset class – that is, real estate, bonds and shares. It is also diversified by geography, with investments in Australia, the US and Europe. Notably, and no doubt deliberately, he does not have much of a direct exposure to China.

Prime Minister Malcolm Turnbull has a diverse investment portfolio. Photo: Andrew Meares

Turnbull’s parliamentary register of interests shows everything from Spanish telco bonds to Australian bank shares and speculative punts on the likes of the ASX-listed Orocobre Limited, which explores for potash, lithium and borax on the salty altiplano of northern Argentina.

He also has a swag of Volkswagen shares, unfortunately. These haven’t fared too well lately in the wake of the false emissions software scandal.

Then there are some shares in Italian automaker Fiat, some BHP stock and what appears to be a holding in a small flooring products company, Embelton.

Lucy Turnbull has a slightly more blue chip approach. Photo: Nick Moir

If there are any flaws in the Prime Minister’s parliamentary disclosures they are that, being loaded, he has a lot of investments but it is sometimes unclear from the security codes what they may be.

The code PFF, for instance, could represent a holding in Panfida Foods, which went belly up on the ASX in 1992, or it could be a holding in the US fixed income investor iShares.

Then there is the disclosure of stock code NLY, which might be shares in Normandy Mt Leyshon, which vanished a long time ago from the ASX and now trades as LRL (Leyshon Resources). For all we know though it could be a holding in a yaks’ milk processor on the stock exchange of Upper Mongolia. The security codes for his investments are not accompanied by detail as to which country they are in.

He also appears to own a few shares in a group called Newzulu, a minnow whose principal business activity is crowdsourcing media products.

Turnbull’s wife Lucy has a slightly more blue chip approach. While she has the odd punt on small ASX companies such as speculative biotech Avita Medical, she also has the run-of-the-mill holdings in Australian big bank stocks.

The PM’s principal investment adviser is Josephine Linden of Linden Global Strategies, a New Yorker and formerly from US investment bank Goldman Sachs, where Malcolm Turnbull was also a partner.

Turnbull will have made good money from being Australia’s first partner of Goldman Sachs but his big win came when he, along with partners Trevor Kennedy and Sean Howard, sold Ozemail to WorldCom in 1999 for $520 million. He’d paid just $500,000 for a one-third stake in the ISP five years prior and sold that for $57 million.

There were no sneaky arrangements to structure the transaction through tax havens and he paid a poultice in capital gains tax.

Eugene Wong, Malcolm Turnbull’s former tax manager at PwC, says Turnbull shied away from offshore structures when he had a “tax problem” after the Ozemail deal. On top of his one-third of that, Turnbull had a large capital gain to deal with from the sale of his partnership shares in Goldman Sachs. He didn’t run his profits offshore, nor did he run with a nursing home scheme, as proposed, Wong told Fairfax Media, and he certainly did not go with a film proposal from the late Babcock & Brown.

“To be fair to Malcolm, he chose not to enter into any tax planning and even said it was because he had future political aspirations and didn’t want any tax skeletons in his closet.”

The basics of tax law have it that a transaction should not be principally for tax purposes but rather for commercial purposes first. Turnbull appears to be kosher on this.

Rather than pinging people for being rich and structuring their personal investments via offshore funds to avoid tax hits in multiple jurisdictions, the priory for Parliament should remain pinging the big tax culprits – foreign-controlled multinational companies.

Turnbull will pay tax – income tax and capital gains – when he redeems his units in offshore investments. Yet the likes of eBay, Google and Apple are merrily siphoning out of Australia and into tax havens the profits they make on their businesses here.

It is not Australians making money in other countries that is the problem, it is the large companies from other countries making money in Australia and ripping it out via dubious transfer pricing and intercompany deals involving royalties and loans that are the real issue.