Prime Minister Malcolm Turnbull insists his income from overseas investments, including those registered in the Cayman Islands, are taxed in Australia.
Mr Turnbull was responding on Wednesday to an allegation by Labor senator Sam Dastyari that he invested in companies dodging tax in the Cayman Islands.
All his investments were approved by the Department of Prime Minister and Cabinet when he was appointed a minister.
"In order to avoid conflicts of interest almost all of my financial investments are in overseas managed funds which means that I have no say in which companies they invest in," the prime minister said in a statement.
Senator Dastyari used parliamentary privilege to accuse the prime minister of inappropriate investments, even though he acknowledged they were legal.
Labor senator Sam Dastyari. Source: AAP
He questioned how it was appropriate for the prime minister of Australia to have investments in Ugland House, which is the listed headquarters for 19,000 companies.
"There is a house in the Cayman Islands, a house where Malcolm Turnbull's money resides," he said.
The senator listed several investments, including in the Bowery Opportunity Fund, which were publicly declared by the prime minister and linked to the tax haven.
But Mr Turnbull said thousands of managed funds with investors outside of the United States were registered in the Cayman Islands and taxed by those investors in their home jurisdictions.
"So all of my income from my investments including funds registered in the Cayman Islands is taxed in Australia," he said.
Senator Dastyari said it wasn't fair or right for a prime minister to have investments registered in a tax haven.
"There is one reason people invest in the Cayman Islands - so they don't have to play by the same rules as the rest of us," he said.
Senator Dastyari has been pushing for major reforms to stop multinational profit shifting and tax avoidance.
Mr Turnbull updated his entry in parliament's register of interests in June 2014, showing he and wife Lucy bought into the Bowrey fund and the CVC Global Credit Opportunity Fund.
At the time transparency campaigners raised concerns about the investments and urged the pair to sell their stake.
