Question Escaping Australia - Controlled Foreign Company Laws and living as a Nomad

[flyinglow]

@flyinglow Which departure exemption are you going to go for in order to leave Australia?

Hey mate, I got approved for 3 months or longer. Send me a message if you need help with an exemption.

 

[username84447]

Hey mate, I got approved for 3 months or longer. Send me a message if you need help with an exemption.

Nice work. Yeah i'll shoot you a message once i'm able to send DM's. Message me if you already can.

This country sure makes it difficult to live a global life.

You're not wrong. Are you aware how Australia assesses non residency status will be changing soon? Could be implemented as soon as next financial year. Gonna make it even worse for leaving with the introduction of sticky residency, but at least it will clear up the grey area, so could actually work in our favour longer term to live more nomadically. Something to keep our eyes on.

 

[flyinglow]

Nice work. Yeah i'll shoot you a message once i'm able to send DM's. Message me if you already can.


You're not wrong. Are you aware how Australia assesses non residency status will be changing soon? Could be implemented as soon as next financial year. Gonna make it even worse for leaving with the introduction of sticky residency, but at least it will clear up the grey area, so could actually work in our favour longer term to live more nomadically. Something to keep our eyes on.

Well I figured I would put the advice up now for any other Aussies who end up stumbling upon this thread .

1) Since the border re opening, you will only need an exemption from DHA if you are unvaccinated.
2) For those of us unvaccinated, your best bet is to apply under the 3 months category on the website.
3) When completing your statutory declaration, make sure everything is formatted correctly (page numbers, get the JP to sign the corner of each page and initial next to that signature too, paragraph numbers etc.)
4) If you are planning to relocate, make sure you get letters from accountants and lawyers that can prove your intention to move and prove that you have funds to cover hotel quarantine. @CyprusLaw helped me out on that one with a letter supporting my intent to leave to Cyprus.
5) Essentially, what the DHA wants to know is that you are leaving for a while. The immigration lawyer that I spoke to had a theory that there is an algorithm that automatically denies any request that states '3 months', so when you are writing your stat dec say 'I intend to be leaving Australia for at least 4 months'. If you have second passports and family overseas that can give you a letter of support, this helps greatly as well, and will strengthen your case a lot.
6) They also want to be confident that you have the funds to cover your flights and accomodation and hotel quarantine if you decide to come back. I proved this through an accountants letter and bank statements.

^Hopefully this all soon becomes obsolete and we are allowed to freely travel again.

In regards to the tax residency changes, yes I have been following these closely. I am really anxious to leave before the adhesive tax residency becomes law. Do you think they could implement all of this before the end of this financial year? Because I plan on changing my residency just before the end of the FY.

 

[username84447]

In regards to the tax residency changes, yes I have been following these closely. I am really anxious to leave before the adhesive tax residency becomes law. Do you think they could implement all of this before the end of this financial year? Because I plan on changing my residency just before the end of the FY.

The industry seems to believe it has a high chance of being implemented for the July 2022 financial year. The final draft however is still in progress, industry has responded to the proposal with concerns and suggestions and now we are waiting for the final legislation to be written for approval.

If it stays as the current proposal, my biggest concern is whether they will have some grace period for people who became non-resident in 2020 or 2021, because otherwise we would answer 'yes' to 'were you in Australia more than 45 days the last year', and then would also answer 'yes' to 'were you a tax resident the current financial year or the previous 2 financial years', and therefore would be caught by the sticky residency. I'm fairly sure they'll have a transition period, they've even mentioned this in there proposal notes, but I'm still anxious to see how they're gonna deal with this.

I'm moving to Thailand, so I'm at least calmed by the fact that I'll have a tax treaty I can rely on. You might need to be more careful if moving to somewhere like cyprus that i don't believe has a double tax agreement with Australia.

 

[flyinglow]

The industry seems to believe it has a high chance of being implemented for the July 2022 financial year. The final draft however is still in progress, industry has responded to the proposal with concerns and suggestions and now we are waiting for the final legislation to be written for approval.

If it stays as the current proposal, my biggest concern is whether they will have some grace period for people who became non-resident in 2020 or 2021, because otherwise we would answer 'yes' to 'were you in Australia more than 45 days the last year', and then would also answer 'yes' to 'were you a tax resident the current financial year or the previous 2 financial years', and therefore would be caught by the sticky residency. I'm fairly sure they'll have a transition period, they've even mentioned this in there proposal notes, but I'm still anxious to see how they're gonna deal with this.

I'm moving to Thailand, so I'm at least calmed by the fact that I'll have a tax treaty I can rely on. You might need to be more careful if moving to somewhere like cyprus that i don't believe has a double tax agreement with Australia.

In the case that I do get caught in a sticky residency, would this mean that I would be paying tax to both Australia and Cyprus due to no DTA? If this is the case, this is especially worrying. I really hope they do allow for a transition period. Are there any resources you could direct me to where I could monitor any updates? I am planning to start setting up my permanent residency and accomodation in Cyprus in December 2021, but only start actually living there June 2022 just before the end of the financial year. I initially thought this would be a good plan and lead to a clean break with the ATO due to me having limited ties in Australia anyway, but from the sounds of things there could be some more things to worry about

When will you be moving to Thailand by the way?

 

[username84447]

would this mean that I would be paying tax to both Australia and Cyprus due to no DTA?

Technically yes. Although really you'd just be paying at the Australian rate as i believe you'd just claim any taxes paid in Cyprus as a tax offset in Australia, although I'm talking out of my scope knowledge now so could be way off.

but from the sounds of things there could be some more things to worry about

Well this is all speculation for now, but yes it's definitely something to consider. My guess would be if you can break ties and be completely non resident in 2022-2023 financial year then they'll have allowances for this and won't drag you back in. Sure, there's a small chance of it, but i think it would be pretty unlikely. Trying to break ties in 2022 might be a different story though. In saying all this, there's also the possibility the legislation isn't ready for the next financial year and doesn't get implemented until 2023, this would be even better for us as we'd have another whole year where we weren't tax residents. Just something we need to keep an eye on really, it's definitely made it urgent for me to break ties sooner than later though.

On a positive note, it seems like these changes might make it easier in the future to be a non resident nomad once residency is broken. Current proposal says if you weren't a tax resident the previous year, and you didn't spend more than 45 days in Australia in the current tax year, then you're still a non resident. This would mean we could have a pretty relaxed residency somewhere (for banking, companies etc) and just move around wherever we want. Dunno if it would actually play out like this, but seems like it, would just be bad for people during the first 3 years of trying to detach.

When will you be moving to Thailand by the way?

Plan is within months of international borders opening (NSW), so hopefully late Nov to early next year.

 

[username84447]

Are there any resources you could direct me to where I could monitor any updates?

Forgot this one. I've just been searching youtube and google once a week for "non resident australia" and sorting by newest to see if anything has come out. I saw someone suggest using google alerts to make a search alert for something like "tax residency changes ato", could be worth doing, never tried it myself.

 

[flyinglow]

Technically yes. Although really you'd just be paying at the Australian rate as i believe you'd just claim any taxes paid in Cyprus as a tax offset in Australia, although I'm talking out of my scope knowledge now so could be way off.


Well this is all speculation for now, but yes it's definitely something to consider. My guess would be if you can break ties and be completely non resident in 2022-2023 financial year then they'll have allowances for this and won't drag you back in. Sure, there's a small chance of it, but i think it would be pretty unlikely. Trying to break ties in 2022 might be a different story though. In saying all this, there's also the possibility the legislation isn't ready for the next financial year and doesn't get implemented until 2023, this would be even better for us as we'd have another whole year where we weren't tax residents. Just something we need to keep an eye on really, it's definitely made it urgent for me to break ties sooner than later though.

On a positive note, it seems like these changes might make it easier in the future to be a non resident nomad once residency is broken. Current proposal says if you weren't a tax resident the previous year, and you didn't spend more than 45 days in Australia in the current tax year, then you're still a non resident. This would mean we could have a pretty relaxed residency somewhere (for banking, companies etc) and just move around wherever we want. Dunno if it would actually play out like this, but seems like it, would just be bad for people during the first 3 years of trying to detach.


Plan is within months of international borders opening (NSW), so hopefully late Nov to early next year.

Thanks heaps for the reply. I still have hope they'll take a while to implement this, and praying I don't get dragged back into their net hahaha.

Yep, I totally agree on your second point. Breaking ties now could prove to be the best thing. No adhesive tax plus the relaxed residency rules will make life pretty sweet. The case law surrounding the residency at the moment is really oppressive. I'm hoping we get the best of both worlds here!

Best of luck with your move to Thailand mate, cheers again for the info, and I'll be back in this thread pinging you if we get any more info on the final draft of the new tax legislation.

 

[flyinglow]

Forgot this one. I've just been searching youtube and google once a week for "non resident australia" and sorting by newest to see if anything has come out. I saw someone suggest using google alerts to make a search alert for something like "tax residency changes ato", could be worth doing, never tried it myself.

After doing a lot of research today, I have found that the current proposal would actually work quite well. Could you let me know if I am missing anything?

It says that in order to break ties with Australia and if you were a tax resident the previous financial year, you would need to satisfy that
A) You resided in Australia for all of the past 3 years
B) You have now got employment overseas on a 2+ year contract
C) You have accomodation overseas the whole time
D) You will be spending less than 45 days in Australia each of those financial years

I have attached a file that further illustrates this concept.

This would mean, in my case, that I would set up a company in Cyprus, give myself a 2+ year employment contract, buy a house and visit only Australia for 45 days in a given and would be out of the tax net.

Additionally, due to Cyprus' relaxed tax residency rules, I would only need to stay there 60 days a year and then could travel the rest whilst being employed as a director in Cyprus. Also, correct me if I'm wrong, but this would eliminate all the oppressive case law around domicile and residence, meaning travelling would be a lot let less stress and you would only have to demonstrate to the ATO that you have abided by their new legislation.

Would appreciate if you could spot any fatal flaws in my plan

 

[username84447]

This would mean, in my case, that I would set up a company in Cyprus, give myself a 2+ year employment contract, buy a house and visit only Australia for 45 days in a given and would be out of the tax net.

We're really getting into speculation now, because this is quite a nuanced part of the proposal so the precise wording and how it would be enforced is more subjective. Being a business owner as yourself, I dismissed this possibility, i'm almost certain it wouldn't pass to simply claim that your own company needed you to move overseas for a 2+ year contract while you barely spent time even in the country you said you were resident. Might pass if they never question it, but i wouldn't think this would pass the scrutiny of the ato.

 

[username84447]

Here's a link to the actual proposal as well as submissions from organizations in response to the proposed changes.

Reforming Individual Tax Residency Rules – A Model for Modernisation | Board of Taxation

Background In May 2016, the Board of Taxation (the Board) commenced a self-initiated review of individual tax residency. In August 2017 the Board presented its findings to Government in ‘Review of the Income Tax Residency Rules for Individuals’ (the 2017 Report). Following extensive consultation...

taxboard.gov.au

You can see on the right hand side links to the consultation guide and final report. Goes into much more depth.

but this would eliminate all the oppressive case law around domicile and residence

That's what I'm hoping, sucks to always be afraid of your own government breathing down your neck for the rest of your life while you want nothing to do with them, but we'll need to break the tie first and then see what the new laws actually say when they're finalised. But yes, could work very nicely for us.