Income tax: Offshore Banking Units (OBU) - is an OBU required to maintain separate bank accounts and separate nostro accounts?

Yes. As pointed out in the Explanatory Memorandum to Taxation Laws Amendment Act (No. 4) 1992 ,an OBU is required to maintain a separate pool of funds and to keep separate identifiable records in respect of the offshore banking activities. These records have to be maintained as though the OBU were a bank conducting banking activities with another person. Accordingly funds are required to move through separate bank accounts including nostro/vostro accounts.

The legislation envisages a complete separation of offshore and domestic banking if the revenue is to be protected. The aggregation of nostro accounts with reliance upon separate accounting records would not provide a satisfactory assurance against the blending of non-OBU and OBU monies. The use of a single nostro account to hold a particular foreign currency would create a serious risk that transactions with Australian residents might be included in the offshore banking part of the business.