Can I avoid 7.5% Dividend Tax

**Fred Bloggs** · 11 July 2016, 08:15

Originally posted by Can1983 View Post

Hi,
I'm new looking for advice...

Since it was announced ive been looking at ways to not pay this 7.5% dividend tax and I think I have a way.

My intention is to move to Australia in a year or two. Whilst I am living there I will still be entitled to my tax free allowance and £5000 tax free dividend, so will my wife.

So can I just keep paying ourselves a director salary and dividends doing my own accounts (its going to be simple without income and expenses) until the money runs out

Is there a flaw I've missed?

You may be able to do this, but look carefully at the ATO information on overseas dividends and your visa/residency status. You may need some careful planning.

**northernladuk** · 11 July 2016, 08:25

That's rather extreme just to avoid paying an extra 2.5k'ish a year isn't it?

**eek** · 11 July 2016, 08:58

Originally posted by Can1983 View Post

Hi,
I'm new looking for advice...

Since it was announced ive been looking at ways to not pay this 7.5% dividend tax and I think I have a way.

My intention is to move to Australia in a year or two. Whilst I am living there I will still be entitled to my tax free allowance and £5000 tax free dividend, so will my wife.

So can I just keep paying ourselves a director salary and dividends doing my own accounts (its going to be simple without income and expenses) until the money runs out

Is there a flaw I've missed?

Why would you do that, when you can close the company down using an MVL and take the money out as a capital gain.....

**Maslins** · 11 July 2016, 09:03

Originally posted by eek View Post

Why would you do that, when you can close the company down using an MVL and take the money out as a capital gain.....

Because with the OP's logic 0% is better than 10% (indeed 7.5% is better than 10%...but OP trying to avoid even 7.5%)?

OP bear in mind if you move permanently to Australia then you'll quickly become Australian resident for personal tax purposes. This means you'll likely be taxable there on your worldwide income. I have no clue about the Australian rate of tax on dividends, but seems like you're assuming it'll be 0%, which may well be incorrect.

**Fred Bloggs** · 11 July 2016, 09:20

Originally posted by Maslins View Post

Because with the OP's logic 0% is better than 10% (indeed 7.5% is better than 10%...but OP trying to avoid even 7.5%)?

OP bear in mind if you move permanently to Australia then you'll quickly become Australian resident for personal tax purposes. This means you'll likely be taxable there on your worldwide income. I have no clue about the Australian rate of tax on dividends, but seems like you're assuming it'll be 0%, which may well be incorrect.

Exactly, hence my comments above. There may be an opportunity but it needs careful planning and advice.

**ChimpMaster** · 11 July 2016, 09:20

The OP's post needs elaboration but it seems he is talking about moving to Oz regardless of any other factors, and possibly not working any more from that point. He can then draw down funds from his UK Ltd company up to the pertinent tax allowances - whether that is UK or Oz, depending on his tax/residency status at that time.

**Fred Bloggs** · 11 July 2016, 10:08

Originally posted by ChimpMaster View Post

The OP's post needs elaboration but it seems he is talking about moving to Oz regardless of any other factors, and possibly not working any more from that point. He can then draw down funds from his UK Ltd company up to the pertinent tax allowances - whether that is UK or Oz, depending on his tax/residency status at that time.

There may be a window of opportunity arising where the ATO will not tax overseas dividends. Hence the need for planning and professional advice.

**jamesbrown** · 11 July 2016, 10:09

Originally posted by Can1983 View Post

Is there a flaw I've missed?

Potentially, yes. For example, if you return to the UK within 5 years, you'll be taxed on all dividends within that period at the prevailing rate during the year of your return.

You'll also have the ongoing accountancy costs and responsibilities as a company director. You may have these responsibilities in Australia too as a controlling person of an overseas corporation (most jurisdictions have these rules).

As I say, there's potentially quite a lot that you've missed. Laws change over time too. In this scenario, you're probably better off winding up and taking a capital distribution, assuming you can meet the conditions.

**kaiser78** · 11 July 2016, 12:53

I have taken some 'extra' dividend in FY 15/16 to account for the new div tax in 16/17.
Accountant did some number crunching and worked out this works out better in terms of overall tax liability for 16/17.

Can I avoid 7.5% Dividend Tax