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Entrepreneurs Relief - Australian Tax Advisor

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    Entrepreneurs Relief - Australian Tax Advisor

    Hi all,
    I've been out of the UK for the past 18 months and I am currently working in Australia on a temporary visa (457).

    I have a substantial amount of money in my limited company current account and I want to take advantage of entrepreneurs relief.

    My understanding is that although I am considered a resident for tax purposes here in Australia (I've been working since Feb, travelling before that) I am a temporary resident which I *believe* means that CGT does not apply if the gain occurs whilst I am a temporary resident.

    I've spoken with my UK accountants who has advised that CGT would become payable the year of my return to the UK if before 5 years (this is likely to happen - and I'm quite OK with that).

    I'm looking to engage an Australian tax advisor who is also familiar with UK tax law in order to clarify my Australian tax position before I go down the MVL route - Google has show a few likely candidates but if anyone can recommend such a person from personal experience it would be much appreciated (preferably Sydney based but not essential). I want to avoid any costly mistakes

    Any other words of advice/pitfalls to look out for also welcomed.

    Cheers, Mister Clark.

    #2
    My understanding is that there can be UK tax implications and there can be Australian tax implications. With regards to Australian tax implications, I have no idea.

    With regards to UK tax implications, my understanding is that you have a choice between:

    a) Taking tax-free dividends now on the basis that you are non-resident for tax purposes. Sounds good, although if you become UK resident again within 5 years (which you say is likely), UK dividend taxes at the higher rate will be payable.

    b) Perform a MVL now and apply to pay ERCGT on proceeds. I'd be surprised if you could perform an MVL and not pay any CGT on the proceeds on the basis that you are non-resident for tax purposes, although I could be wrong on that...?

    Comment


      #3
      Originally posted by alphadog View Post
      b) Perform a MVL now and apply to pay ERCGT on proceeds. I'd be surprised if you could perform an MVL and not pay any CGT on the proceeds on the basis that you are non-resident for tax purposes, although I could be wrong on that...?
      There are special rules if you're leaving during a tax year and the 5-year rule also applies to CGT as I recall.

      Comment


        #4
        Originally posted by alphadog View Post
        My understanding is that there can be UK tax implications and there can be Australian tax implications. With regards to Australian tax implications, I have no idea.

        With regards to UK tax implications, my understanding is that you have a choice between:

        a) Taking tax-free dividends now on the basis that you are non-resident for tax purposes. Sounds good, although if you become UK resident again within 5 years (which you say is likely), UK dividend taxes at the higher rate will be payable.

        b) Perform a MVL now and apply to pay ERCGT on proceeds. I'd be surprised if you could perform an MVL and not pay any CGT on the proceeds on the basis that you are non-resident for tax purposes, although I could be wrong on that...?
        Thanks for the reply.

        My accountant has advised:

        "Under current rules, temporary non UK residents will be subject to CGT on assets disposed of whilst abroad in the year in which they return to the UK. A temporary non UK resident is where you spend fewer than 5 years as a non resident so based on your current intentions, you are likely to fall into this category."

        So basically pay it when I get back which is fine.

        Taken from the AGO (Austalian version of HMRC):

        "If you are an Australian resident for tax purposes and meet the requirements to be a temporary resident, the temporary resident rules mean:

        If a capital gains tax event occurs on or after 12 December 2006, a temporary resident is not liable to capital gains tax (nor is treated as having made a capital loss) unless the asset is 'taxable Australian property'.

        If a capital gains tax event (such as the sale of an asset) occurred between 1 July 2006 and 12 December 2006, a temporary resident was not liable for capital gains tax (nor was the temporary resident treated as having made a capital loss) unless the asset had a 'necessary connection with Australia'. Special rules apply to capital gains on shares and rights acquired under employee share schemes (For more information employee share scheme refer to Foreign income exemption for Australian residents and temporary residents - employee share schemes)."

        So, I think I will pay 10% in the UK but nothing in Australia - due to the amounts involved however, I think it wise to be 110% sure before I go forward.

        Comment


          #5
          Originally posted by Mister Clark View Post
          "Under current rules, temporary non UK residents will be subject to CGT on assets disposed of whilst abroad in the year in which they return to the UK. A temporary non UK resident is where you spend fewer than 5 years as a non resident so based on your current intentions, you are likely to fall into this category."

          So basically pay it when I get back which is fine.
          Trouble is that it's anyones guess as to whether ERCGT at 10pc is going to exist next year, let alone in 3-5 years time. And HMRC has a habit of making changes retrospective. It's going to be a bit of a lottery IMHO as to how much tax you will pay when you re-enter the UK. On the other hand, if you end up staying in Oz for more than 5 years, it sounds like you won't pay any tax at all.

          Comment


            #6
            Originally posted by alphadog View Post
            Trouble is that it's anyones guess as to whether ERCGT at 10pc is going to exist next year, let alone in 3-5 years time. And HMRC has a habit of making changes retrospective. It's going to be a bit of a lottery IMHO as to how much tax you will pay when you re-enter the UK. On the other hand, if you end up staying in Oz for more than 5 years, it sounds like you won't pay any tax at all.
            I asked that to my accountant at the same time, he replied:

            "I have searched the ER legislation and cannot find any direct mention of a protective claim. However, I have found some guidance relating to this which was issued by the Chartered Institute of Taxation. The advise given is that a protective claim for ER is submitted within the time limit for the actual year of disposal and then if you do then come within the charge to CGT as a result of being a temporary non resident then ER should be available."

            So hopefully all good, but, I must say I have my reservations after the current attack on contractors over the last few years which is a big reason I'm considering this at all.

            Comment


              #7
              Try Alan Collet at Go Matilda Tax. Offices in both the UK and OZ.

              Tax and Accounting Solutions for Individuals and Businesses in UK and Australia
              Have you tried switching it off and back on again??

              Comment

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