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Deferring Tax Liability - Australian Tax Resident & Offshore Company Options

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AnderssonK76

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Apr 11, 2022
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#1
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Hello everyone,

I'm currently an Australian citizen and tax resident in the highest marginal tax bracket and expecting to earn a significant income in the coming months. My goal is to avoid paying the high marginal tax on this income by setting up a separate company in a low tax and business-friendly jurisdiction. I want to invoice my client for the upcoming revenue through this company, accumulate the income within the company, and pay myself dividends or salary in the future when my marginal tax rate is lower.

I've been considering company structures in Wyoming. However, I'm concerned about the tax implications of a Wyoming LLC, as it is treated as a pass-through entity for tax purposes. As an Australian tax resident, I would end up paying the high marginal tax on the LLC's income anyway. I've also looked into the Controlled Foreign Company (CFC) rules in Australia, which could complicate my plans to defer tax liability using a foreign company.

I'd appreciate any advice on suitable company structures or other strategies to defer tax liability. If you have any experience or knowledge in this area, please share your insights and recommendations.

Thank you in advance for your help and input!
 
#2
There's no way to achieve tax reduction or deferral while you are still a tax resdient of Australia. They have some of the strictest CFC rules and are very aggressive in enforcement - the risk is not worth taking. I'd suggest moving to a low tax country like Thailand or Dubai.
 
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#3
If its a once off transaction, then tax planning may be available at least for working around cfc rules, however GAAR or similar rules and their application by Australia tax department should be assessed. If your payer is situated aborad and the work from your side has not yet been carried out then you could attempt something.
 
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#4
I would look into what @CyprusLawyer101 is suggesting, it may be the better solution for what you are looking for.
 
#5
CyprusLawyer101 said:
If its a once off transaction, then tax planning may be available at least for working around cfc rules, however GAAR or similar rules and their application by Australia tax department should be assessed. If your payer is situated aborad and the work from your side has not yet been carried out then you could attempt something.
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the payer is located in UK. and the work will be carried out continuously month by month and invoiced accordingly. approx 20k usd per month.
 
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