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  • #986863
    dominikm
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    Hi All!

    Got a quick question. I’m moving abroad to Germany and I have a side business I run as a sole trader.

    Right now I’ve only made about $14,000 (after expenses) in this FY but come the end of the FY I’ll be over $18,200 and will have to pay tax.

    So my question is this.

    Is there anything wrong/illegal with selling my business to myself in Germany once I’m setup as a sold trader there for $500 or 500 to myself as a sole trader in Germany.

    As you can determine the cost you sell a business for right?

    Say I hit $25,000 income after expenses on June 20th and the business is say sold on June 20th so I don’t have to do a a FY15 tax return as I don’t have any ozzie income in FY15 and all I have to do is go on eTax and say I didn’t have income. I sell my business and pay tax on the income I made from $18,200 -$25,000 (or $25,500 if I sold it for $500).

    Is this ok to do?

    I can’t see why not as companies are bought and sold all over the globe and it’s really the parties involved (me only on this one) who determine it’s worth. So I can be the one to say it’s worth only $500 right?

    I’m really green in this area so some advice would be great before I speak to an accountant about this!

    Thanks!
    Dom

    #1159910
    Dave Gillen – Former FS Concierge
    Keymaster
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    Hi Dom,

    Thanks for joining us on Flying Solo!

    A bit tricky for me, but hopefully someone in-the-know will drop by to help. :)

    Dave

    #1159911
    dominikm
    Member
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    FS Forum Support, post: 184574 wrote:
    Hi Dom,

    Thanks for joining us on Flying Solo!

    A bit tricky for me, but hopefully someone in-the-know will drop by to help. :)

    Dave

    I hope so to Dave!

    #1159912
    nighttax
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    • Total posts: 172
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    Hi Dom

    Missing important information – Is the business operating and earning its income in Australia?

    If it does then it doesn’t matter where the business is owned from an Australian tax return will still have to be done. It will just be done by a non-resident entity.
    example: Mt Isa Mines is a business in Australia but it is owned by Exstrata which is a business in Sweden. They still lodge an Australian tax return because Mt Isa Mines is operating in Australia.

    If it currently runs in Australia but is only doing jobs for overseas customers then it will not matter. You will simply close the business down here and open it in Germany and pay tax on the income in Germany.

    Hope this helps
    Evan

    #1159913
    dominikm
    Member
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    nighttax, post: 184577 wrote:
    Hi Dom

    Missing important information – Is the business operating and earning its income in Australia?

    If it does then it doesn’t matter where the business is owned from an Australian tax return will still have to be done. It will just be done by a non-resident entity.
    example: Mt Isa Mines is a business in Australia but it is owned by Exstrata which is a business in Sweden. They still lodge an Australian tax return because Mt Isa Mines is operating in Australia.

    If it currently runs in Australia but is only doing jobs for overseas customers then it will not matter. You will simply close the business down here and open it in Germany and pay tax on the income in Germany.

    Hope this helps
    Evan

    Hi Evan,

    Thanks for the info.

    I think I’m in the clear of closing the business down and re-opening in Germany.

    I can justify this as all my customers are outside of Australia. Most are in USA. I might have the 1 rouge customer in Australia and I’ll have to cancel his monthly service to be in the clear but I guess if I cancel his service and he resigns up after a month or so I’m still in the clear.

    2 questions for you though:

    1. Isn’t closing down a company and then restarting it in another location in the world without selling it illegal as you are avoiding selling it and paying tax on the sale or I guess you could say it’s like a phoenix company getting out of paying it’s debts (in this case getting out of paying tax on profits of the company sale, even though it’s a minimal amount of a $500 sale).

    2. I run everything though PayPal and they are quite strict. My PayPal account is registered as a sole trader with my ABN. I’ve called PayPal several times and argued with them and they won’t budge. If I open a German or any other country PayPal account they won’t transfer the 60 or so monthly subscription payments I have setup.

    The only way to get it done is to ask all my customers to subscribe to new PayPal links and I just think this is a joke from a customer stand point. To ask them to do this is poor customer service. So I don’t want to do it and I know I’ll loose customers in doing this also.

    So the actual question – If I keep running my Australian PayPal account as it is where you can’t remove the ABN. Will this cause any issues. I’ve got my business in Germany now and I pay tax there I just happen to use a PayPal account based in Australia and to get my funds out I just transfer them over to a German PayPal account.

    If you could help me out with these two questions I would be so grateful!

    #1159914
    nighttax
    Member
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    dominikm, post: 184578 wrote:
    Hi Evan,

    Thanks for the info.

    I think I’m in the clear of closing the business down and re-opening in Germany.

    I can justify this as all my customers are outside of Australia. Most are in USA. I might have the 1 rouge customer in Australia and I’ll have to cancel his monthly service to be in the clear but I guess if I cancel his service and he resigns up after a month or so I’m still in the clear.

    2 questions for you though:

    1. Isn’t closing down a company and then restarting it in another location in the world without selling it illegal as you are avoiding selling it and paying tax on the sale or I guess you could say it’s like a phoenix company getting out of paying it’s debts (in this case getting out of paying tax on profits of the company sale, even though it’s a minimal amount of a $500 sale).
    A company is different to a sole trader so which are you? Also if a company has only 1 shareholder and no debts then it is legally entitled to do a voluntary wind up if it so wishes.
    2. I run everything though PayPal and they are quite strict. My PayPal account is registered as a sole trader with my ABN. I’ve called PayPal several times and argued with them and they won’t budge. If I open a German or any other country PayPal account they won’t transfer the 60 or so monthly subscription payments I have setup. No Bank would just automatically do this. New Direct Debit agreements have to be set up between the new entity (in Germany you will not have the same ABN as in Australia so the legal entity changes)

    The only way to get it done is to ask all my customers to subscribe to new PayPal links and I just think this is a joke from a customer stand point. To ask them to do this is poor customer service. So I don’t want to do it and I know I’ll loose customers in doing this also. I am sure if you have happy customers then they won’t mind resubscribing. Otherwise you can just have the German entity bill the Australian entity for the exact amount of the income to the Paypal account. That way you can lodge a return not necessary return for your Australian entity.

    So the actual question – If I keep running my Australian PayPal account as it is where you can’t remove the ABN. Will this cause any issues. I’ve got my business in Germany now and I pay tax there I just happen to use a PayPal account based in Australia and to get my funds out I just transfer them over to a German PayPal account.

    If you could help me out with these two questions I would be so grateful!
    Regards
    Evan

    #1159915
    dominikm
    Member
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    nighttax, post: 184588 wrote:
    Regards
    Evan

    Hi,

    Sorry I mixed it up a bit there. I’m a sole trader so if I wanted to just shut things down I can do so I presume. If a company can do this then so can a sole trader from what you have said. Is this right?

    That makes sense with PayPal as it’s a direct debit agreement in the end.

    What are your thoughts on keeping the Australian PayPal account open if I didn’t want to shut down the PayPal account so I don’t have to get customers to resubscribe? Would I technically still be operating as an sole trader because the ABN is on the account and the account is in my name in Australia. And is this a bad thing if my ABN is closed off?

    Thanks!
    Dom

    #1159916
    LucasArthur
    Participant
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    dominikm, post: 184589 wrote:
    Hi,

    Sorry I mixed it up a bit there. I’m a sole trader so if I wanted to just shut things down I can do so I presume. If a company can do this then so can a sole trader from what you have said. Is this right?

    That makes sense with PayPal as it’s a direct debit agreement in the end.

    What are your thoughts on keeping the Australian PayPal account open if I didn’t want to shut down the PayPal account so I don’t have to get customers to resubscribe? Would I technically still be operating as an sole trader because the ABN is on the account and the account is in my name in Australia. And is this a bad thing if my ABN is closed off?

    Thanks!
    Dom

    Are you leaving Australia forever? Or is there tax motivation behind this?

    Re paypal and leaving account open with an ABN that is no longer in use is asking for trouble. If paypal do an audit or a complaint is lodged about you and your non existent business, paypal will hold your money and freeze your account and side with subscriber… Not worth the trouble… I believe if you are running a business you need to do things correctly!

    Also, if you are changing to Germany for sound reasons and you need to alter bank accounts or processes, you should have already weighed up all the pros and cons and how this will effect your existing clients. This, if change proceeds the benefits obviously outweigh the slight inconvenience of the changes you are querying (PayPal change and ABN etc etc)..

    If you move, paypal should change and subscribers should change as well.. A simple “please subscribe to our new improved model here and your old subscription will be cancelled within 24 hours of upgrading”

    Good luck, let us know how you go.

    Jason

    Ps I have sidestepped the dance you are querying re legalities of sole trader et as this is not my expertise but I think your issue is more raw than that such as should it be done.. Sometimes for the benefit of the new you need to let go of the old :)

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
    #1159917
    dominikm
    Member
    • Total posts: 10
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    SimplyReplica, post: 184590 wrote:
    Are you leaving Australia forever? Or is there tax motivation behind this?

    Re paypal and leaving account open with an ABN that is no longer in use is asking for trouble. If paypal do an audit or a complaint is lodged about you and your non existent business, paypal will hold your money and freeze your account and side with subscriber… Not worth the trouble… I believe if you are running a business you need to do things correctly!

    Also, if you are changing to Germany for sound reasons and you need to alter bank accounts or processes, you should have already weighed up all the pros and cons and how this will effect your existing clients. This, if change proceeds the benefits obviously outweigh the slight inconvenience of the changes you are querying (PayPal change and ABN etc etc)..

    If you move, paypal should change and subscribers should change as well.. A simple “please subscribe to our new improved model here and your old subscription will be cancelled within 24 hours of upgrading”

    Good luck, let us know how you go.

    Jason

    Ps I have sidestepped the dance you are querying re legalities of sole trader et as this is not my expertise but I think your issue is more raw than that such as should it be done.. Sometimes for the benefit of the new you need to let go of the old :)

    Hi again,

    Thanks so much for all your responses! I really appreciate it.

    All valid points on PayPal and bank accounts. And I have looked into it in more detail but it’s not really about it’s worth it or not as I want to travel the globe. And being a sole trader is a bad thing one you hit over the 30% tax rate but again being a director of a company if I was to go that track doesn’t work as Austria needs a resident director and I believe the requirements are 183 days in Australia in 1 months and I would be eligible.

    Re leaving Australia. I already am abroad and have been for 7 months just travelling and I don’t plan on coming back. There is a whole world out there to explore with 200+ countries and I spent 4+ years working like hell to understand how to build an online business from just the interent to not be location bound. Australia bores me lol. Yes we live in an awesome country but again there are 200+ countries out there and 25+ years in Australia is enough for me ahha

    So sure there will be visits here and there to Australia for say good friends birthdays and maybe Christmas’s but I’m gone from Australia permanently. Berlin will be my base where I’ll have an apartment for now at least as it’s central for that part of the world to travel from and to between seeing Europe, Middle East and other areas around there and I can also keep all my stuff there when I’m not there instead of storage units and I don’t have a home if I just use storage.

    So not to get out of tax at all. Going to be abroad from now and a lot of other factors :)

    #1159918
    dominikm
    Member
    • Total posts: 10
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    Hi all,

    I hope I can get one more answer to my question.

    I was just looking at the residency test answers:

    What to do next

    As a foreign resident, you only need to lodge annual Australian income tax returns if you receive income from sources in Australia. In this case, you:

    will be subject to income tax at foreign resident rates. There is no tax-free threshold.
    need to advise entities from whom you derive Australian investment income that you are not an Australian resident for tax purposes. The correct amount of tax can be withheld from your investment income.
    may need to advise your employer that you are not an Australian resident for tax purposes so that the correct amount of tax can then be withheld from your salary or wages.
    may be entitled to receive your superannuation benefits once you leave Australia if you held a temporary visa (since cancelled or expired). Refer to Guide to Superannuation for individuals for more information.

    And from what I see and correct me if I’m wrong. If I’m a non-resident in Australia for tax purposes I just pay the non-resident tax rate. So I don’t have to worry about anything at all with my business.

    As long as I’m a resident of a country that doesn’t tax foreign sourced income I wont be double taxed and if they do and have a double tax treaty with Australia I’m fine also.

    So from what I read I should be able to simply keep my sole tradership going and I simply pay tax on all my earning.

    I know I’ll pay more tax but if I’m happy to do this it’s an option right?

    Or the fact I would stay a sole trader. Would this make me a resident for tax purposes in Australia?

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