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Question:
What should I do with my company while overseas for a few years?
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
If you leave Australia for an extended period and your company is incorporated here, it will continue to be an Australian tax resident. This remains the case unless a double tax agreement with another country assigns residency to that country based on a tie-breaker provision. These provisions can be complex and depend on the facts, so advice may be needed. Generally, the company will still be subject to Australian tax on its worldwide income.
Under the Corporations Act, every company must have at least one director who resides in Australia. If you are the sole director and will not be living in Australia, you must appoint an additional or replacement director who is. This is a legal requirement.
Also, a company must appoint a public officer who is a natural person, at least 18 years old, and a resident. The public officer must sign the company’s tax returns and ensure the company meets its obligations under tax law. They must be appointed within three months of the company starting business or generating income in Australia. Penalties may apply if this is not done. If the company has a secretary, at least one secretary must also ordinarily reside in Australia.
If the company continues to trade or, more generally, it must fulfil its ongoing obligations, including lodging tax returns, maintaining records, and complying with corporate and tax laws. If the company earns foreign income, that income must be reported in Australian dollars. If the company pays foreign tax, it might generate an Australian foreign income tax offset, depending on the circumstances. If the company operates through a permanent establishment overseas, some income may be exempt from Australian tax under domestic laws or treaties, but this depends on the structure and location of the activity.
If the company won’t trade, it might be best to deregister it, but this requires that the company has no assets or liabilities. Alternatively, you might restructure or sell the company. Each option has legal and tax implications that should be considered carefully.
Reviewing your company’s structure before leaving is essential as a business owner. You probably need to appoint a resident director and public officer and verify that any secretary meets the residency requirements. Decide whether the company will remain active, be restructured, or dissolved. Ensure compliance continues and seek tailored advice based on your specific circumstances.
