Australia is an attractive savings and investment destination for Asia's affluent communities and will become even more of a magnet for Asian savings if the government follows through on its commitment to reduce interest withholding incurred by financial institutions on interest they pay on deposits from offshore.Citibank head of retail banking, Ajay Kashyap, said the group has had success with a strategy of using its 500-strong branch network throughout Asia to direct the savings of high net worth customers to Australia.Kashyap said half of the assets under management in the high net worth customer segment in the Australian retail bank were sourced overseas.He said it was common practice for affluent people in countries such as Thailand and Indonesia to set up savings and investment accounts offshore. A lot of that money ends up in Hong Kong and Singapore but Australia is also a favourable destination.Kashyap said: "Australia is attractive to these people. They may be planning to retire here, and so it makes sense to be moving their assets here. Australia also appeals because its investment markets are well developed."He said initial flows were usually into savings accounts but there was usually some asset diversification down the track.Citibank is expecting this market to grow. Removal of the interest withholding tax would accelerate that growth.Last month the government announced that various forms of interest withholding tax on financial institutions would be phased out or reduced over the next five years.Financial institutions that raise offshore retail deposits currently pay 10 per cent withholding tax on the interest. The plan is to reduce that to 7.5 per cent in the 2013/14 financial year and then to five per cent in the 2014/15 year. The government said its "aspirational target" was to reduce the tax to zero but no timeframe has been given for meeting that goal.Standard Chartered Private global chief executive, Peter Flavel, told a private banking conference in Sydney earlier this month that Asia was a big potential market for Australian banks sourcing offshore funds.But Flavel said the market would not take off until the withholding tax reform went through. "The tax situation has to be equivalent to the way investors would be taxed in Hong Kong or Singapore."