# Running Remotely a small business in Australia and living Overseas



## AussieBExpat (Oct 26, 2021)

Hi Expats,

I am an Australian Citizen and I run a small company in Australia remotely by living overseas (in India). I pay myself a salary into my Australian Bank account. I don't have to visit Australia as things can be done online. In this situation Would I be considered as a tax resident for tax purposes in Australia and get taxed on my income outside Australia.

Advice is really appreciated.

Thanks


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## Moulard (Feb 3, 2017)

It will depend on your personal circumstances.

You could very well be a tax resident of Australia - If you are in India temporarily then you could well still meet the domicile, resides or 183 day rule.

You can use this calculator to help decide









Calculators and tools







www.ato.gov.au





If a tax resident of Australia then, given you are working in India, your salary would be considered Indian sourced and you would be able to claim a foreign income tax offset for any taxes actually paid to the Indian taxing authority.

If you are not a tax resident of Australia then your salary you pay yourself in India would only be taxable by India.

If both India and Australia consider you a tax resident, then you would have to revert to the tie breaker rules in the tax treaty between India and Australia






Income Tax Treaties | Treasury.gov.au


tr { vertical-align:top; font-size:small; } Treaty information and implementation 1 Multilateral Instrument2 Withholding on Managed Investment Trust distributions Country or




treasury.gov.au





The income and tax residency of the company is significantly more complicated, and the tax treatment of the company's income will depend on factors such as

whether you are a tax resident or not
where your clients are located
structure the company was set up under (sole trader, Pty Ltd, Incorporated etc)
whether you working from India creates permanent establishment in India for your company


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## AussieBExpat (Oct 26, 2021)

Moulard said:


> It will depend on your personal circumstances.
> 
> You could very well be a tax resident of Australia - If you are in India temporarily then you could well still meet the domicile, resides or 183 day rule.
> 
> ...


Hi Moulard,

I really appreciate your response Moulard.

May be I should have added these points -
I have moved to India permanently (given that I could run the company remotely from India). Moved to India on Feb 2021. So for FY 2020-2021, I understand that I am a tax resident of Australia.
I have no permanent residence (neither long term lease in Australia).
I have no immediate family who are related to me are living in Australia.
I am not part of any sporting/rotary clubs in Australia.
I have a family home and a lot of family in India.

My company clients are located mostly in Australia.
My company is a Pty Ltd company
I don’t have permanent establishment in India for my Australian Company.

Any thoughts?


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## AussieBExpat (Oct 26, 2021)

AussieBExpat said:


> Hi Expats,
> 
> I am an Australian Citizen and I run a small company in Australia remotely by living overseas (in India). I pay myself a salary into my Australian Bank account. I don't have to visit Australia as things can be done online. In this situation Would I be considered as a tax resident for tax purposes in Australia and get taxed on my income outside Australia.
> 
> ...


Just wanted to add the following points related to the above situation - 

I have moved to India permanently (given that I could run the company remotely from India). Moved to India on Feb 2021. So for FY 2020-2021, I understand that I am a tax resident of Australia.
I have no permanent residence (neither long term lease in Australia).
I have no immediate family who are related to me are living in Australia.
I am not part of any sporting/rotary clubs in Australia.
I have a family home and a lot of family in India.

My company clients are located mostly in Australia.
My company is a Pty Ltd company
I don’t have permanent establishment in India for my Australian Company.


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## Moulard (Feb 3, 2017)

Given what you state you could well have been a part year resident of Australia for the 20-21 tax year. With residence ending when you departed in Feb.

If you haven't done so already, remember if you are self-lodging you have until 31 Oct to do so.. 
If you engage a registered tax agent before 31 Oct then they have different lodgement schedules.

An unincorporated company that carries on business in Australia is a resident of Australia if it has either

Its voting power controlled by shareholders who are resident in Australia, or
its central management and control in Australia
If you are the sole shareholder of the Pty. Ltd. then you don't meet point 1.

Whether or not its central management and control will depend on where its directors are located. Which leads to the question...

Your Pty. Ltd. does have an Australian resident Director doesn't it?

Remember all Australian proprietary companies are required to have at lease one Australian resident Director. 

If you are the sole director then you are operating in breach of the Corporations Act 2001

To comply you would have to appoint someone to act as an Alternative Director while you are out of the country - and technically this this should have been done within 28 days of you leaving the country... 

There are management companies out there that can help you and provide someone to act in that capacity for you.

As to permanent establishment in India... not so fast. 

Permanent establish is a key international tax concept that means a business can be subject to corporate / company income tax in jurisdictions even if they lack a subsidiary or legal entity there.

I am not familiar with the India-Australia tax treaty, but the OECD Model treaty provides that simply having facilities at the disposal of an enterprise can create a "place of business" - your home or leased office space could well tip you over the line. You will want to look carefully at the tax treaty, and Indian domestic law related to foreign companies operating in India.

If Deemed you were operating a business in India, then you may well need to establish an Indian company and comply with income tax withholding (on your salary you pay yourself) and the like.


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## AussieBExpat (Oct 26, 2021)

Moulard said:


> Given what you state you could well have been a part year resident of Australia for the 20-21 tax year. With residence ending when you departed in Feb.
> 
> If you haven't done so already, remember if you are self-lodging you have until 31 Oct to do so..
> If you engage a registered tax agent before 31 Oct then they have different lodgement schedules.
> ...




Yes I have lodged the tax return for FY 2020-21. The company tax return is due to be lodged until Feb 2022.

And Yes, I have appointed an Alternative resident director for the Company.

Now as I mentioned in my main message - _"I pay myself a salary into my Australian Bank account."_ Currently, as I am overseas for about 4 months now in the FY 2021-22, I am still following resident tax rates for PAYG withholding. My intention is to stay overseas (as my small business can be run remotely). And once I become more than 6-7 months as a foreign resident in FY 2021-22 then maybe I should follow non-resident tax rates for PAYG withholding. Is that right?

And with all this would I become a tax resident individual of Australia?
I understand that my company would always be a resident company of Australia as I have a resident alternate director.

Your thoughts are very much appreciated.


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## Moulard (Feb 3, 2017)

lets say its not unheard of for the resident director requirement to be forgotten (including by the owners of my company) 

But yes, what you say sounds right. 


You file a new tax file declaration and tick that you are a non-resident,
Your Pty Ltd will then start to withhold income tax at the non-resident flat rate.
I believe your Pty Ltd can continue to contribute to your super for up to 5 years -under the guise of sending you to India to work there. (you may want to research bilateral social security agreements)
When you file your return with the ATO you can claim treaty benefits for your Indian sourced salary and obtain a refund on the basis that India will have the primary right to tax your dependent personal services income (treaty talk for salary).
If you ever pay yourself a dividend it will be taxed differently (treated as Australian sourced if the treaty is like most)
I do really suggest you read up on the dual tax agreement 



http://www.austlii.edu.au/au/other/dfat/treaties/1991/49.html



and its amending protocol



http://www.austlii.edu.au/au/other/dfat/treaties/ATS/2013/22.html



You may also want to run all this over with a tax professional - these sorts of mini-multinationals have all sorts hiccoughs - and there may be better ways to structure things for a tax planning perspective (both for you and your pty ltd)


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## AussieBExpat (Oct 26, 2021)

Moulard said:


> lets say its not unheard of for the resident director requirement to be forgotten (including by the owners of my company)
> 
> But yes, what you say sounds right.
> 
> ...


Appreciate your inputs and time and the info that you have provided, there is quite a lot of reading material in the links that I have to go through again and again to understand properly.

Out of curiosity, are you a tax planner / financial planner of some sort? If not do you know someone who is very knowledgeable and have experience in these kind of situations. 
And who doesn't charge me arm and a leg..😄 you know what I mean?

Cheers!!!


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## Moulard (Feb 3, 2017)

Being well informed on these sorts of things is always a good idea.

No, I am not a tax planner, just some random tax treaty nerd (but a reasonably well informed random) on the internet who likes to help people arm themselves with enough information to be able to ask the right sorts of questions of someone who does know what they are doing from an international tax planning perspective.

Yeah, it will take a while to get used to treaty language. but it is broken up into articles that define specific types of income. So you don't really need all of it, just the bits relevant to you.

The articles on scope, benefits and the various sorts of income relevant to you both now and possibly in the future, permanent establishment (important for your company), and reduction of double taxation articles you should read each one until you can parse what it means.

Then skim through the more recent amending protocol. You then just need to pick out any of the original treaty clauses of interest to you that are impacted by the change along with any brand new articles.

The thing to bear in mind is that these treaties aren't really there to protect you. they are there to divide the spoils.

You should also look at the bilateral social security agreement and its impact on things like super contributions vs Indian equivalent contributions. THis will control whether or not your Pty Ltd will need to pay into super or an Indian equivalent scheme, how to get certificates of coverage which can also become important when it comes to tax time.


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## AussieBExpat (Oct 26, 2021)

Moulard said:


> Being well informed on these sorts of things is always a good idea.
> 
> No, I am not a tax planner, just some random tax treaty nerd (but a reasonably well informed random) on the internet who likes to help people arm themselves with enough information to be able to ask the right sorts of questions of someone who does know what they are doing from an international tax planning perspective.
> 
> ...


Yes, understood... and you are right! 
will do... Nice to chat with you and Appreciate all the info...


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