Bermuda has been branded a tax haven in reports in Australian news sites about alleged tax avoidance practices.

The claims stem from a report by the Federal Government's financial intelligence agency, Austrac, which revealed that at least $5.01 billion flowed out of Australia last financial year to 41 countries identified as tax havens, with Bermuda, Jersey and the Cayman Islands at the top of the list.

Austrac has extensive powers to monitor transactions between Australian financial institutions and offshore companies.

Australia's Federal Opposition said that tax advisers are promoting the use of jurisdictions such as Bermuda to help individuals and small businesses avoid paying tax in Australia.

The Opposition assistant treasury spokesman, David Cox, said the Federal Government should crack down and amend the law to ensure the practice did not become widespread. Mr. Cox said Bermuda had become the most used tax haven, according to Australia's Tax Office figures, with more than $2.5 billion shifted there last financial year.

However the Tax Office responded yesterday that only a fraction of the $5.01 billion was lost tax revenue, saying much of the money flowing to tax havens is used for legitimate purposes such as shipping and insurance

"There are genuine non-tax-offensive transactions involving some of these countries on which tax is properly paid," said Tax Office First Assistant Commissioner Kevin Fitzpatrick.

Mr. Fitzpatrick conceded that there had been an increase in small-time investors using tax havens and attributed this to the easier access to foreign bank accounts through the internet.

Responding to the reports, Bermuda Ministry of Finance officials yesterday commented that there was no substance to the allegations : "Once again, it appears that Bermuda's good name is being cast about rather loosely." said Financial Secretary, Donald Scott.

"Bermuda is not a tax haven," he continued, "Bermuda's taxation system is not designed to attract mobile capital from other countries. Highly reputable companies come to Bermuda to conduct legitimate business because of our reputation as a `blue chip' jurisdiction for international business."

The Australian tax authorities have announced that they are negotiating bilateral deals with Caribbean nations and other so-called tax havens with the aim of sharing information about what accounts Australians hold and how much money they contain.

The Bermuda Ministry of Finance was not available to confirm whether they have been contacted by the Australian tax authorities in this regard.