montagt

Hi,

I am an IT contractor with my own limited company. I will be moving to Sydney March next year and am looking for some advice on whether I should close my limited company in the UK and start a new one in Australia, or keep using my UK company or even if it is worhtwhile running a limited company in Australia. (Do they have an equivelant to the UK IR35)

I am hoping to be able to still do contract work in Australia (depending on the market at the time).

Any info from anyone that had done this or from people that have experience would be appreciated....

Megalania

UK coy only good if you export from UK to Aus. Must have/use Aussie coy to contract in Aus else hope you can work as a casual employee. Some accountants have companies you can use for a fee, else use mates coy.

cadman

I'm not sure what you should do regarding your limited company / starting one in OZ but I do know that they do indeed have an equivalent to IR35 unfortunately:scared:

I'm a contract CAD draughtsman here in the UK and subscribe to SHOUT the newsletter for contractors fighting IR35 here in the UK. In one of their recent e-newsletters they had by chance an article on the similar laws that have been introduced in Oz.

My cousin's (sponsor) husband in Melbourne is in IT and I asked him a couple of times about the benefits of being self-employed vs staff in OZ but he didn't seem to think there were any - probably because he's a staffie and always has been.

Alan Collett

As a general rule I don't recommend continuing with a UK limited company when you move to Australia, as you can easily double up on your compliance costs in that you can expect to have to lodge accounts with both the UK and Australian authorities.

There are indeed some tax provisions that apply to personal service companies in Australia, but the lobbying by those who would have been affected if all the legislation had been enacted has meant that the outcome is not nearly so problematic as the IR35 provisions in the UK.

I think it also fair to say that the ATO isn't (yet) so determined in its approach to this issue as the Inland Revenue ...

In summary, I suggest you take some professional advice as the subjects you have raised are too broad to discuss on a forum => please send me an email if you'd like to pursue this further.

Best regards.

Jolyn

We were IT contractors in UK too. If you're planning to stay in Oz you'll need an Aussie ltd co so close yours down here and get yourself an Aussie accountant lined up.

Look on the Australian Tax Office website. They do have an equivalent to IR35 but it is more straightforward. It's usually referred to informally as the 80/20 rule. There's a flow chart on the ATO website to determine your status for personal service companies or whatever they're called in Oz.

Pretty simple compared to IR35 - various rules but the basic one is if more than 80% of your work comes from the same client you're caught. So I guess more likely to be caught in Oz but at least you know where you stand. Case law applies to borderline cases same as here but determining whether you're caught in a simple case doesn't involve complex examination of contract wording, 'in business on your own account' factors etc.

Oz has a contractors association you can join on the web with all the info. Can't remember the name but if you belong to the PCG in the UK there's a link to it from there.

Contracts are in short supply in Oz same as here sadly and permie jobs are easier to come by.

dracupg

I was in the same situation and decided to wind up the UK company for a couple of reasons:

1. You have a 6 month window to transfer assets from the UK to Oz after taking up residency before they become subject to Oz tax. Any money you have tied up in retained profits etc you should get over as soon as possible. We couldn’t do this without winding up the company.

2. The hassle with keeping the company going in the UK even if it isn’t trading didn’t seems worthwhile; VAT returns, Company accounts, accountancy fees etc.

Generally, I don’t think the IT market in Oz, certainly Sydney, is very buoyant, and a lot of companies are taking the opportunity to replace contractors with permies. Its easy enough to set up a company over here if you get a contract, but given the IR35 type rules, as a one man company there is no real incentive to do it given the additional cost associated with it. You can always do it at a later stage if you want.

Good luck!

Alan Collett

Just a quick note to say that there's no 6 month window on the winding up of a company and distributing funds => if you don't get the timing exactly right and effect the final distributions properly you are subject to Aussie tax on the distribution of funds from the UK company.

Are you thinking of the 6 month window that applies to transfers of pension fund monies into Australia post arrival?

Best regards.

dracupg

This was the advice I received at the time, and it could have been wrong. There were a number of other factors involved to do with minimising both my UK and OZ personal and corporate tax liability (which I would prefer not to go into here - I suppose everyone’s situation is different), but the upshot of it was that it was in my interest to liquidate all my assets in the UK and transfer them to Oz within the 6 months of taking up residency.

My understanding of the pensions transfer rules is that only personal pensions are subject to the 6 month transfer window and occupational pensions are exempt.

Alan Collett

Hello again Gordon.

Re the pensions issue - the 6 month window applies to ALL pension transfers into Australia from the UK. In other words if you transfer a pension fund into an Australia Super Fund more than 6 months after becoming tax resident in Australia (whether it is employer sponsored or a personal pension) you have a potential exposure under section 27CAA of the ITAA 1936.

The employer sponsored pension fund exemption only applies to the FIF Rules.

Best regards.

dracupg

Hi Alan,

Found quite a good worked example on this:-

http://www.moneymanagement.com.au/ar...5/0c0167f5.asp

And the ATO have a Draft Ruling on it at http://law.ato.gov.au/pdf/tr03-d02.pdf which has some quite good examples at the bottom.

As far as transferring occupational pensions to Oz, it would seem that you are damned if you do, and damned if you don’t.

Alan Collett

Thanks for these links Gordon.

I'll have a read of them on my flight up to Sydney tomorrow morning!

Best regards.

dracupg

If you are looking for something to put you to sleep, a large Scotch would probably be quicker.