Wealth Safe

Seychelles Company For Australian Business Owners: Tax, Banking And What You Need To Know

Virna White — Sat, 07 Nov 2026 16:57:52 +0000

WATCH THE SEYCHELLES EPISODE FIRST
This article is based on the Seychelles episode of The Wealth Safe Country Series – “Seychelles Company For Australian Business Owners: Tax, Banking And What You Need To Know”
If you prefer video, watch the episode above for the full discussion with Virna White.
The article below expands on the tax, banking and residency questions Australian business owners, founders and investors should consider before establishing a Seychelles company.

Can A Seychelles Company Offer A More Favourable Tax And Commercial Environment?

Seychelles is often promoted as an attractive jurisdiction for establishing an offshore company: low corporate taxation, international business opportunities and relatively straightforward company formation.

For an Australian business owner looking to operate internationally, particularly in consulting, advisory or service-based businesses, that can sound appealing. And for business owners who have genuinely established their lives overseas, the right international structure may create significant commercial and taxation opportunities.

But there is an important question I want you to consider: does Seychelles actually make sense for your business?

Those opportunities depend on how the arrangements are structured. A Seychelles company is not automatically tax-free. Its taxation depends on the applicable rules, the nature and source of its income, and where its business activities are conducted.

Establishing an offshore company does not automatically deliver the taxation advantages you are looking for. And choosing a jurisdiction because it is inexpensive to establish a company does not necessarily mean it is the right commercial decision.

When the arrangements are properly aligned, Seychelles may play a valuable role in your international business arrangements. The real question is whether Seychelles can support the business you are building and the international future you are planning.

Why Business Owners Consider Seychelles?

Seychelles is an established international corporate jurisdiction. For certain international businesses, it can offer a relatively cost-effective company structure to establish and maintain, and a corporate environment worth considering, particularly for consultants and service providers operating across multiple countries, including in Asia and the Middle East.

Receiving international revenue efficiently is also an important commercial consideration, so banking needs to support cross-border payments. But having overseas bank accounts does not, by itself, determine where business profits are taxable.

Seychelles may suit certain business models, but not every international client or bank will be comfortable dealing with a Seychelles company. Commercial suitability, banking access and the company’s actual activities all need to be considered.

Because a company that looks attractive on paper may create practical difficulties if the banking, commercial and taxation arrangements do not work together.

Does A Seychelles Company Change Your Australian Tax Position?

This is where Australian business owners need to understand an important distinction.

Genuinely changing your Australian tax residency and establishing an appropriate international business structure can materially change your taxation position. But establishing a Seychelles company alone does not achieve that outcome.

Your personal tax residency and the company’s tax position are separate considerations. The company’s management and control and any applicable foreign company rules also need to be considered. A company incorporated overseas may be treated as an Australian tax resident in certain circumstances, including where its central management and control is in Australia. And Australia’s controlled foreign company (CFC) rules can, in some circumstances, attribute certain income to Australian resident controllers. Any existing Australian business interests, and the consequences of transferring them, also need to be considered.

For business owners who have legitimately established their lives overseas, appropriately structured arrangements may create genuine opportunities, but the outcome depends on your actual circumstances.

Request Free 15-Min Suitability Assessment

This 15-minute Zoom call is designed to determine whether Wealth Safe and the Complete Wealth Control System may be suitable for your circumstances.

Is A Seychelles Company Tax-Free? Seychelles Tax And Compliance

Not automatically. Seychelles taxes business income on a territorial basis: Seychelles-sourced income is taxable, while foreign-sourced income generally is not. However, certain foreign-sourced passive income may only be exempt where the company has adequate economic substance in Seychelles, and income from business actually carried on in Seychelles may be taxable there.

The local tax position is only part of the picture. Tax may still arise in Australia, the UAE, Malaysia or elsewhere, depending on where you are resident, where the company is managed and where its activities are carried on.

A Seychelles company also carries ongoing obligations, including a registered agent and office in Seychelles, annual fees, registers (including a register of beneficial owners) and accounting records lodged at its registered office in Seychelles. Beneficial ownership information is provided to the authorities through the registered agent, and economic substance requirements may apply depending on the company’s activities and income.

Why An Australian Consultant Considered Seychelles

We worked with Daniel, an Australian management consultant. Daniel operated internationally, working with clients across Asia, the Middle East and parts of Europe. He had established his life internationally, living between Dubai and Malaysia, with residency arrangements in both countries.

His circumstances created an opportunity to consider a more suitable international business structure. He wanted something commercially practical, cost-effective to maintain, suitable for his international consulting activities and capable of supporting payments from clients across different markets. Seychelles was one of the jurisdictions considered.

But before deciding whether it was appropriate, we needed to understand more than the cost of establishing a company. We needed to understand how his business, residency, banking and taxation arrangements could be aligned to support his commercial objectives and potentially achieve a more favourable taxation position.

There were also important commercial questions. Would his international clients be comfortable contracting with a Seychelles company? Could the banking arrangements support payments from the countries where he operated? Would the structure reflect his genuine business activities? And how would his residency arrangements affect the overall position?

That is why the jurisdiction decision needs to be made within the broader strategy.

For Daniel, Seychelles presented a potential opportunity. It offered a relatively cost-effective corporate structure for consideration alongside his international consulting activities. But the decision could not be made on incorporation costs or local tax treatment alone. His clients operated across several markets, his personal residency arrangements involved Dubai and Malaysia, and his business required international banking capabilities. Those factors needed to be considered together, including how multi-currency banking could support payments from his international clients.

The objective was to establish an international business arrangement that supported his actual activities, commercial requirements and longer-term plans.

Seychelles was a jurisdiction to assess within that strategy, not the strategy itself.

Request Free 15-Min Suitability Assessment

This 15-minute Zoom call is designed to determine whether Wealth Safe and the Complete Wealth Control System may be suitable for your circumstances.

When Does A Seychelles Company Make Sense, And When Doesn’t It?

A Seychelles company may make sense for an internationally mobile business owner who needs a commercially practical structure to support business activities across multiple countries.

But depending on the business model, client markets, banking requirements, residency arrangements and taxation considerations, another jurisdiction may be more appropriate for some business owners. And for others, an additional company may not be necessary at all.

That is the distinction we make at Wealth Safe.

How Wealth Safe Approaches A Seychelles Company

We do not begin by deciding which offshore company you should establish. We begin by understanding your Australian position, your business, your international activities and the future you are trying to create. From there, we determine what is required to support that future.

As Chief Strategist, my role is to design that international architecture so the different elements work together as one integrated system, from strategic advice through to implementation within Wealth Safe’s established international ecosystem.

Because a Seychelles company is a structure. It is not an international strategy.

Conclusion

A Seychelles company can be a cost-effective structure for the right business, but it is not automatically tax-free and does not, on its own, change your Australian tax position.

The country is not the strategy. The architecture comes first.

If you are an Australian business owner considering a Seychelles company or looking to structure your international business activities, you can book a complimentary 15-minute Suitability Assessment with Wealth Safe to explore your circumstances and determine whether Wealth Safe and the Complete Wealth Control System may be suitable for you.

Request Free 15-Min Suitability Assessment

This 15-minute Zoom call is designed to determine whether Wealth Safe and the Complete Wealth Control System may be suitable for your circumstances.

Frequently Asked Questions

Can An Australian Business Owner Set Up A Seychelles Company?

It is generally possible, through a licensed Seychelles registered agent. The more important question is whether it can support your business activities, banking and tax position, which depends on your residency and how the business actually operates.

Is A Seychelles Company Tax-Free?

Not in every case. Seychelles-sourced income is taxable while foreign-sourced income generally is not, but certain foreign-sourced passive income is only exempt where the company has adequate economic substance, and tax may still arise in Australia or wherever you live.

Do I Still Pay Australian Tax If I Own A Seychelles Company?

That depends mainly on your residency. If you remain an Australian tax resident, a Seychelles company does not take you outside the Australian tax system, and its income may be taxed in Australia under the CFC rules or if it is centrally managed and controlled here. Genuinely changing your residency, with appropriate arrangements, can change that position.

What Happens To My Australian Company If I Establish A Seychelles Company?

Setting up a Seychelles company does not change it on its own. Your Australian company keeps its own legal and tax obligations, and transferring business activities or assets between the companies has legal and tax consequences that need to be considered.

Is Seychelles Suitable For International Consultants And Service Businesses?

It may be, for some. A Seychelles company can offer a cost-effective structure for services delivered across several countries, but suitability depends on whether your clients and banks will deal with it, your actual business activities and your residency.

Can A Seychelles Company Open An International Bank Account?

Potentially, but it is not guaranteed. Account opening depends on each bank’s own checks and its view of the company’s business, ownership and activities, and having an overseas bank account does not, by itself, determine where business profits are taxable.

What Are The Ongoing Compliance Requirements For A Seychelles Company?

Ongoing requirements include a registered agent and office in Seychelles, annual fees, registers (including a register of beneficial owners) and accounting records lodged at its registered office in Seychelles. Beneficial ownership information is provided to the authorities through the registered agent, and economic substance requirements may apply depending on the company’s activities and income.

Does A Seychelles Company Make Sense For My International Business Strategy?

It may, for an internationally mobile business owner with genuine international consulting or service activities, but another jurisdiction, or no additional company at all, may suit others better. Wealth Safe assesses your complete position, designs the broader strategy and carries it from strategic advice through to implementation within its established international ecosystem.

Disclaimer: This information is general in nature and provided for educational purposes only. It does not constitute legal, tax, or financial advice. You should obtain independent professional advice before acting on any information in this article.

Leaving Australia? What Happens To Your Family Home And Investment Properties?

Virna White — Sat, 07 Nov 2026 04:12:07 +0000

WATCH EPISODE 3 FIRST
This article is based on Episode 3 of Wealth Safe’s Australian Asset Series – “What Happens To Your Australian Property?”
If you prefer video, watch the episode above for the full discussion with Virna White.
The article below expands on the property questions Australian business owners, founders and investors should consider before moving overseas, from the family home to investment properties held in different structures.

Can You Keep Your Australian Property When You Move Overseas?

Yes, you can generally keep Australian property after becoming a non-resident for tax purposes. But keeping it does not necessarily mean your tax position stays the same. Whether you become a non-resident depends on your circumstances, not simply on moving overseas.

You have spent 10, 20 or 30 years building your wealth in Australia: your family home, your investment properties, perhaps an entire property portfolio.

Now you are planning to move overseas. And you are thinking: “I’ll just keep my Australian properties. I can always sell them later.”

But what if selling your family home after moving overseas could leave you with a tax bill you never expected? Or your investment properties became less tax-effective once you are a non-resident?

Leaving Australia does not necessarily mean selling your property. But keeping it without understanding the consequences could become an expensive decision. So it matters to understand what happens to your Australian property when you move overseas.

Could Selling Your Family Home After Moving Overseas Trigger A Tax Bill?

Most Australians understand that when you sell your family home, you generally do not pay capital gains tax, provided the relevant conditions are met.

But what happens if you move overseas first?

If you eventually sell while you are a foreign resident for Australian tax purposes, you may no longer qualify for the main residence exemption, even though it was your family home for decades. Limited exceptions can apply.

Let’s say you have owned your family home for 20 years. You bought it for $600,000. Today, it is worth $1.8 million. That is a $1.2 million increase in value. Now you are relocating overseas, but instead of selling, you decide to keep it.

And here is what many Australian families may never have considered. A home that could have been sold tax-free while you were an Australian resident may have a very different tax outcome if you sell after becoming a non-resident.

Those consequences need to be understood before the decision is made, which is why the timing of a sale can matter.

Request Free 15-Min Suitability Assessment

This 15-minute Zoom call is designed to determine whether Wealth Safe and the Complete Wealth Control System may be suitable for your circumstances.

What Happens To Your Australian Rental Income When You Become A Non-Resident?

Now, perhaps you have built a portfolio of investment properties. They are generating rental income, and you are planning to live overseas.

Does becoming a non-resident mean that rental income is no longer taxed in Australia? No. Australian rental income generally remains taxable in Australia.

And as a foreign resident, you generally will not receive the Australian tax-free threshold. Your eligible expenses may still be deductible. But your overall tax outcome can change.

Here is the question you need to consider. Your property might be generating positive cash flow today. But how much of that income will you actually keep after tax once your residency changes?

Because owning a profitable property and owning a tax-effective investment are not necessarily the same thing.

Does It Matter How Your Australian Properties Are Owned?

Recently, I worked with a family considering an international move. They had six Australian investment properties. Some were owned personally, others through discretionary trusts, and another through their self-managed super fund.

Now, you might think: “They’re all Australian properties. Surely the same rules apply?”

Not necessarily. Because how you own your properties can be just as important as the properties themselves.

Personally owned properties raise one set of tax considerations. Trust-owned properties, including those in family trusts, raise questions about residency, control and taxation. And an SMSF has specific residency, management and compliance requirements that can be affected when you relocate.

Six properties. Three different ownership arrangements. Potentially very different consequences.

That is why looking at each property in isolation can mean missing the bigger picture. You need to understand how your entire Australian wealth position fits together.

Request Free 15-Min Suitability Assessment

This 15-minute Zoom call is designed to determine whether Wealth Safe and the Complete Wealth Control System may be suitable for your circumstances.

Should You Sell Australian Property Before Or After Leaving Australia?

Here is a question that could make a substantial financial difference: “Should I sell my Australian investment property before I become a non-resident, or wait until afterwards?”

Australian property generally remains subject to Australian capital gains tax when you sell. But foreign residents can face different tax treatment, including restrictions on the CGT discount. And your former family home raises additional considerations.

Here is where I see business owners make assumptions that can become expensive. They focus on what they will sell their property for, without considering how much they will actually keep after tax once their residency changes.

Selling before you leave is not automatically the right decision, and keeping the property is not automatically the better one.

The issue is not simply whether you sell before or after leaving Australia. It is understanding how that decision interacts with everything else you are planning internationally.

Why Australian Property Decisions Must Fit Your International Strategy

Here is what I want you to think about. You have spent decades building your Australian property wealth. But now you are planning the next chapter of your life overseas.

The question is not simply whether you can keep your properties. It is whether keeping them still makes financial sense.

Will they continue generating the returns you expect? Could your tax position change? Are they held in ownership structures that remain appropriate for your circumstances? And what happens when you eventually sell?

Because a property decision that makes sense while you are living in Australia may not make the same sense once you are living overseas.

At Wealth Safe, we look at your Australian assets alongside your residency, ownership structures and international plans, not as separate decisions, but as part of your Complete Wealth Control strategy.

Conclusion

You’ve spent 10, 20 or 30 years building your Australian property wealth. Don’t let a decision made during your international move undermine what you’ve spent decades creating.

Retaining Australian property may be appropriate for some individuals, while selling or reviewing existing arrangements may be appropriate for others.

What matters is understanding how those decisions fit into the complete Australian and international position.

If you would like to explore whether Wealth Safe’s strategic approach is suitable for your circumstances, you can request a complimentary 15-minute Suitability Assessment.

Request Free 15-Min Suitability Assessment

This 15-minute Zoom call is designed to determine whether Wealth Safe and the Complete Wealth Control System may be suitable for your circumstances.

Frequently Asked Questions

Can I Keep My Family Home And Investment Properties If I Move Overseas?

Yes. You can generally retain Australian property after becoming a non-resident for tax purposes. However, your ongoing rental income, future capital gains tax treatment and other financial considerations may be affected by your change in residency.

Will I Pay Capital Gains Tax If I Sell My Family Home After Moving Overseas?

Potentially. While qualifying Australian family homes are generally exempt from capital gains tax, individuals selling a former main residence while foreign residents for Australian tax purposes may no longer qualify for that exemption. Limited exceptions can apply, and the outcome depends on the circumstances.

Do I Still Pay Australian Tax On Rental Income If I Live Overseas?

Generally, yes. Rental income from Australian property usually remains taxable in Australia even after you become a non-resident. Different tax rates and rules may apply, and eligible property expenses may remain deductible.

Does It Matter If My Australian Property Is Owned Through A Family Trust Or SMSF?

Yes. Property held personally, through a discretionary trust or within an SMSF can involve different taxation, residency, control and compliance considerations. The consequences depend on the ownership arrangements and individual circumstances.

Should I Sell My Australian Investment Property Before Becoming A Non-Resident?

Not necessarily. The timing of a property sale can affect its tax treatment, including potential restrictions on the CGT discount for foreign residents. The appropriate decision depends on the property, ownership arrangements, tax residency and broader financial and international objectives.

Can I Sell My Australian Property After Becoming A Non-Resident?

Yes. Becoming a non-resident does not generally prevent you from selling Australian property. However, Australian capital gains tax and foreign-resident withholding obligations may apply, depending on the circumstances. The tax consequences should be understood before making the decision.

Moving Your Business Offshore: ABN, ACN & GST Obligations

Virna White — Mon, 02 Nov 2026 14:05:01 +0000

Introduction

When you move a business offshore, it is easy to assume your ABN, ACN, & GST registrations cancel themselves once you leave. Each is instead tied to business activity & legal structure, not to where you live, so each needs to be reviewed against the business’s circumstances.

This article explains what each registration is tied to, when it must be cancelled, when it should be kept, & what obligations continue while it stays active. It is written for Australian business owners planning an offshore move who want to avoid leaving registrations open too long or cancelling them too early.

Interactive Tool: See If You Should Keep or Cancel Your ABN, ACN & GST

Offshore Business Registration Compliance Checker

Quickly check if you need to keep, update, or cancel your ABN, ACN, or GST registration when moving your business offshore.

Step 1 of 3

Is your Australian business still carrying on any enterprise or trading activity after you move offshore?

Step 2 of 3

Is your company (with an ACN) remaining registered with ASIC after you leave?

Step 3 of 3

Will your annual GST turnover remain above $75,000 after moving offshore?

✅ You Must Keep Your ABN, ACN & GST Registration Active

Because your business will continue operating in Australia and your company will remain registered, you must keep your ABN, ACN, and GST registration active.

Ongoing obligations include lodging BAS and company annual reviews, maintaining a resident director, and updating details within 28 days of any change. Cancelling any registration too early can create compliance gaps or penalties.

Refer to Section 201A of the Corporations Act 2001 (Cth) for the resident director requirement.

Talk to our Tax & Asset Protection Advisory Team

✅ You Can Cancel Your ABN, ACN & GST Registration

Since your business will cease all Australian activity and your company will be deregistered, you should cancel your ABN and GST registration within 21 days of closing or selling the business, and complete ASIC deregistration for your company.

Ensure all outstanding BAS, tax returns, and debts are finalised before cancellation. Cancelling an ABN will also cancel linked registrations, including GST.

See Section 601AA of the Corporations Act 2001 (Cth) for company deregistration and ATO guidance on ABN/GST cancellation.

Book a Compliance Exit Review

⚠️ GST Registration May Be Cancelled, But ABN/ACN May Remain

Your business will continue in Australia, but GST turnover will fall below $75,000. You may be eligible to voluntarily cancel your GST registration, but must keep your ABN and ACN active while the business and company remain operational.

Ensure you lodge all final BAS and update your details with the ATO and ASIC as required.

Refer to ATO guidance on GST cancellation and Section 201A of the Corporations Act 2001 (Cth).

Speak to a Specialist About GST Deregistration

⚖️ Company Deregistration: Tax & Legal Consequences

You plan to deregister your company but may still have an active ABN or GST registration.

Company deregistration is a deliberate process with tax and legal consequences, including possible capital gains tax. Ensure all obligations are met before deregistration.

See Section 601AA of the Corporations Act 2001 (Cth).

Book a Strategy Call for Company Exit

⚠️ Update Your Details & Monitor Ongoing Obligations

If you keep any registration (ABN, ACN, or GST) active, you must update your details within 28 days of any change and continue to meet all reporting and compliance obligations from overseas.

Penalties can accrue if you miss deadlines or fail to monitor correspondence.

See ATO and ASIC guidance for ongoing compliance.

Talk to our Advisory Team About Ongoing Compliance

Why These Registrations Do Not Automatically Cancel When You Leave

The Link Between Registrations & Business Activity

Relocating overseas does not decide whether an Australian Business Number (ABN), GST registration, or company registration remains appropriate. These registrations are tied to business activity criteria and legal obligations, not to where the owner lives. As a result, moving offshore does not automatically cancel or modify any of them.

Specifically:

An ABN remains connected to the enterprise being carried on.
GST registration depends on the business continuing to meet the relevant GST criteria.
A company registration remains a separate compliance responsibility.

Therefore, an Australian business owner cannot treat an overseas move as a cancellation event.

The Risks of Incorrectly Managing Active Registrations

Keeping GST or other tax registrations active can leave reporting obligations after trading stops. Required business activity statements (BAS), including nil statements, must be lodged on the applicable reporting cycle. Late lodgment of required returns can lead to penalties.

On the other hand, cancelling an ABN or GST registration while Australian business activity continues can create compliance gaps. In addition, cancelling an ABN also cancels most linked registrations, including GST.

Your ABN; When to Keep It & When to Cancel It

Understanding the Purpose of an Australian Business Number

An ABN is an 11-digit identifier issued by the Australian Taxation Office (ATO) for tax reporting and business dealings. It is linked to carrying on an enterprise in Australia, not to the personal residency of the business owner.

For Australian business owners, the key question is whether an Australian enterprise continues. A foreign national or overseas-based business can hold an ABN where the relevant Australian business activity exists. The registration is not dependent on citizenship or living in Australia.

Retaining Versus Cancelling the ABN After Departure

An ABN can be retained where Australian business activity continues after departure. It should be cancelled where the business has permanently stopped trading, has been sold, or has been transferred offshore so that the Australian enterprise has genuinely ended.

Cancelling an ABN does not settle outstanding tax obligations. Cancelling it too early can also remove an identifier still needed for continuing Australian activity.

Request Free 15-Min Suitability Assessment

This 15-minute Zoom call is designed to determine whether Wealth Safe and the Complete Wealth Control System may be suitable for your circumstances.

Your ACN; What Happens to Your Australian Company When You Leave

The Persistence of ASIC Company Registration

Leaving Australia does not remove an Australian company’s registration with the Australian Securities & Investments Commission (ASIC). An Australian Company Number (ACN) is the 9-digit identifier issued when an Australian company is registered, so the company remains a separate registered entity even when its owner or director lives overseas.

Practically, this matters for Australian business owners when relocation is treated as a reason to stop monitoring the company because the registration continues until a deliberate deregistration occurs.

Ongoing ASIC Obligations & Deregistration Consequences

While the company remains registered, its ASIC compliance obligations continue. From 1 July 2026, the proprietary company annual review fee is $342.

While registered, the company must also:

maintain an Australian registered office;
complete the required solvency resolution;
confirm company details; and
meet financial reporting obligations where applicable.

A proprietary company must have at least one director who ordinarily resides in Australia under Section 201A of the Corporations Act 2001 (Cth) (‘Corporations Act‘). Practically, this matters for business owners when the only Australian-resident director leaves, or when ASIC correspondence and reporting are not managed from overseas.

Missed obligations can lead to:

late fees;
restrictions on the company’s ability to operate in Australia; or
deregistration.

Deregistering the company is a deliberate process with tax and legal consequences, including capital gains tax consequences.

Your GST Registration; When It Still Applies & When It Doesn’t

How GST Registration Interacts With an Offshore Move

Relocating overseas does not decide whether an Australian business keeps its GST registration. GST registration is tied to carrying on an enterprise in Australia and GST turnover, not to where the owner lives.

Registration becomes mandatory when annual GST turnover reaches $75,000, while voluntary registration is available below that threshold. Australian business owners may need to retain the GST registration where Australian enterprise activity continues or GST turnover remains above the registration threshold.

However, the GST registration may no longer be required where:

the business is sold;
the business is closed; or
the business structure changes.

This creates a cancellation issue rather than a residency issue.

Managing Active BAS Lodgment Obligations

An open GST registration carries ongoing BAS obligations on the required reporting cycle, including nil statements where applicable.

A GST registration must be cancelled within 21 days of:

selling the business;
closing the business; or
changing its business structure.

Voluntary cancellation may also be available where GST turnover falls below the compulsory registration threshold. However, cancelling too early can prevent the business from continuing to operate on a GST-registered basis and create compliance gaps.

Request Free 15-Min Suitability Assessment

This 15-minute Zoom call is designed to determine whether Wealth Safe and the Complete Wealth Control System may be suitable for your circumstances.

What to Review & Action Before You Leave

Assessing Each Registration Against Legal Criteria

Relocating overseas does not decide whether an ABN, ACN, or goods & services tax (GST) registration remains necessary. Practically, this matters for Australian business owners when an offshore compliance review and structure remediation process must distinguish personal relocation from changes to the underlying business activity or legal structure.

The review should consider:

ABN: whether an enterprise continues in Australia, or the business has stopped trading, been sold, or is being permanently closed.
ACN: whether the Australian company will remain registered, with its ongoing ASIC obligations continuing.
GST registration: whether the business remains required to register, or whether cancellation is available because the business has closed, changed structure, or its GST turnover is below the compulsory registration threshold.

Leaving an unnecessary GST or other tax registration open can create continuing reporting obligations, while premature cancellation can create compliance gaps.

Updating Details & Managing Ongoing Compliance

Registrations that are no longer required should be cancelled through the available ATO or ASIC channels, but cancellation does not remove outstanding reporting, payment, employee, superannuation, or record-keeping obligations. Before an ABN cancellation:

all required activity statements and tax returns should be lodged;
outstanding tax debts should be paid;
employee obligations should be completed; and
any unentitled refunds should be repaid.

Details for registrations that remain active must be kept current. An ABN’s details must be updated within 28 days of a change, while ASIC must be notified of relevant changes to company details within the applicable timeframe.

Practically, this matters for business owners when the following must continue from overseas:

contact arrangements;
correspondence monitoring;
bookkeeping;
BAS lodgment;
tax reporting; and
ASIC compliance.

Otherwise, missed notices can leave penalties accumulating while the registration remains open.

Conclusion

Moving overseas does not end Australian registration obligations. The ABN, company registration linked to the ACN, & GST registration each depend on business activity, tax reporting & legal structure — not the owner’s location. Australian business owners must review each registration separately because keeping an unnecessary GST or other tax registration active can create ongoing lodgment obligations, while cancelling one that remains required can create a compliance gap.

An Australian company’s ASIC registration also continues while the company remains registered, with annual fees, resident director, registered office, solvency & reporting obligations requiring attention. Australian business owners considering an offshore departure should request a free 15-minute suitability assessment with WealthSafe’s offshore compliance review and structure remediation specialists for tailored advice on the ABN, ACN & GST position. WealthSafe helps keep the resulting structure compliant, documented & consistent with how the business operates overseas.

Frequently Asked Questions

Does moving offshore automatically cancel an ABN?

No, moving offshore does not automatically cancel an ABN. The ABN relates to carrying on an enterprise in Australia, so it may remain active while Australian business activity continues.

What happens if an ABN is kept active without any business activity?

Reporting obligations come from GST and other tax registrations rather than the ABN itself. If those registrations stay active after trading stops, required business activity statements (BAS), including nil statements, must still be lodged on the applicable reporting cycle, and late lodgment can lead to penalties.

Does cancelling an ABN affect a GST registration?

Yes, cancelling an ABN usually cancels linked registrations, including GST. Luxury car tax & fuel tax credit registrations are also cancelled automatically.

How long is the timeframe to cancel a GST registration after closing a business?

A GST registration must be cancelled within 21 days of selling or closing the business, or changing its structure. A changed business structure includes moving from a partnership to a company unless the old business continues another business; where the offshore company structure is being reconsidered, international company offshore structure design may also be relevant.

What is the penalty for failing to lodge a Business Activity Statement?

For 2025–26, the penalty was $330 for each 28-day period, or part of a period, up to $1,650. These penalties can accumulate while registrations remain active.

Are ASIC fees still required to be paid if relocating overseas?

Yes, ASIC fees remain payable while an Australian company remains registered. From 1 July 2026, the proprietary company annual review fee is $342.

Can an Australian company operate without a resident director?

No, Section 201A of the Corporations Act requires every Australian proprietary company to have at least one director who ordinarily resides in Australia. Relocating the owner overseas does not remove this requirement.

Can a GST registration be voluntarily cancelled when moving offshore?

Yes, GST registration can be voluntarily cancelled when GST turnover falls below the compulsory registration threshold. Exceptions apply to taxi drivers, certain representatives of incapacitated entities & some Australian resident agents for non-resident businesses.

What must be completed before cancelling any business registrations?

Before cancelling a registration, all required activity statements & tax returns must be lodged, outstanding tax debts paid, employee obligations completed & unentitled refunds repaid. Final reporting, payment & record-keeping obligations can continue after cancellation.

Can Your Company Carry Forward Tax Losses After an Offshore Restructure?

Virna White — Mon, 02 Nov 2026 13:56:05 +0000

Introduction

Accumulated tax losses are a valuable asset, yet an offshore restructure can wipe them out without warning when it changes who directly holds your company’s shares or rights. The tension is that a step taken for other reasons can quietly put the continuity of ownership test at risk, even where the ultimate owner stays the same.

This article explains how an offshore restructure puts carried-forward losses at risk, how the business continuity test operates as a fallback, and which restructuring steps most commonly trigger the loss rules.

Interactive Tool: See If Your Carried-Forward Tax Losses Are Still Available

Australian Company Tax Loss Continuity Checker

Quickly check if your company’s carried-forward tax losses are at risk after an offshore restructure.

Has there been (or will there be) a change in direct share ownership or control as part of your offshore restructure?

Will the rights attached to shares (voting, dividend, or capital rights) change during or after the restructure?

If the continuity of ownership test is not satisfied, will the company continue the same or a similar business after the restructure?

✅ Your Carried-Forward Tax Losses Are Likely Preserved

Based on your answers, your company is likely to satisfy the continuity of ownership test under Section 165-12 of the Income Tax Assessment Act 1997 (Cth), provided that more than 50% of voting, dividend, and capital rights remain with the same people throughout the relevant period. You should still review your loss calculation workpapers and ensure all records are up to date.

Note: This is a general guide only. Complex restructures or indirect changes may still trigger the loss rules. Seek specialist advice before proceeding.

Legislative References:

Section 165-10 of the Income Tax Assessment Act 1997 (Cth)
Section 165-12 of the Income Tax Assessment Act 1997 (Cth)
Section 165-165 of the Income Tax Assessment Act 1997 (Cth)

Speak to a Specialist about Offshore Tax Loss Structuring

⚠️ Tax Losses May Be at Risk – Business Continuity Test Required

Your answers indicate that the continuity of ownership test may be broken due to changes in direct ownership or share rights. Your company will need to satisfy the business continuity test (same or similar business) under Section 165-210 of the Income Tax Assessment Act 1997 (Cth) and LCR 2019/1 to use carried-forward losses. This test must be met every year you wish to apply the losses.

Warning: If the business changes substantially, losses may be denied. Specialist review is strongly recommended.

Legislative References:

Section 165-10 of the Income Tax Assessment Act 1997 (Cth)
Section 165-12 of the Income Tax Assessment Act 1997 (Cth)
Section 165-210 of the Income Tax Assessment Act 1997 (Cth)
Law Companion Ruling LCR 2019/1

Book a Strategy Call with our Offshore Tax & Asset Protection Team

❌ Tax Losses Likely Lost After Restructure

Your answers suggest that both the continuity of ownership test and the business continuity test will not be satisfied. This means your company’s carried-forward tax losses are likely to be denied under Section 165-10 and Section 165-93 of the Income Tax Assessment Act 1997 (Cth).

Action Required: You may need to amend prior tax returns and consider alternative structuring options. Immediate specialist advice is essential.

Legislative References:

Section 165-10 of the Income Tax Assessment Act 1997 (Cth)
Section 165-12 of the Income Tax Assessment Act 1997 (Cth)
Section 165-93 of the Income Tax Assessment Act 1997 (Cth)
Law Companion Ruling LCR 2019/1

Talk to our Offshore Tax & Asset Protection Team Now

⚖️ Complex Scenario – Specialist Review Needed

Your situation involves factors that may trigger the loss integrity rules under the Income Tax Assessment Act 1997 (Cth). Both direct and indirect changes to ownership, share rights, or business activities can have significant tax consequences. A bespoke review is required to determine if your company’s losses can be preserved.

Next Step: Arrange a confidential review with our team to avoid costly mistakes.

Legislative References:

Section 165-10 of the Income Tax Assessment Act 1997 (Cth)
Section 165-12 of the Income Tax Assessment Act 1997 (Cth)
Section 165-93 of the Income Tax Assessment Act 1997 (Cth)
Law Companion Ruling LCR 2019/1

Book a Specialist Review of Your Offshore Structure

Why an Offshore Restructure Can Put Tax Losses at Risk

The Value of Accumulated Tax Losses for a Company

Accumulated company losses can reduce future taxable income once the business becomes profitable. They remain within the company, rather than being distributed to shareholders, and can generally be carried forward indefinitely under the company loss rules.

That benefit is conditional. Under Section 165-10 of the Income Tax Assessment Act 1997 (Cth) (‘ITAA 1997’), a company must satisfy either:

the continuity of ownership test; or
the business continuity test before applying an earlier tax loss.

For Australian business owners, the risk is that the restructure is assessed as a shareholding or control change only after the loss has already been treated as available.

How Restructuring Triggers the Loss Integrity Rules

An offshore restructure can change who directly owns or controls an Australian company, even where the same individual remains the ultimate beneficial owner. That change can place the carried-forward loss under the continuity of ownership test, which examines ownership of voting, dividend, and capital rights across the relevant ownership test period.

If the continuity of ownership test is not satisfied, the company must rely on the business continuity test to use the loss. A failure of the relevant tests can remove the deduction, producing:

an amended assessment;
penalties; and
a general interest charge where the loss was claimed incorrectly.

The loss intended to support future tax outcomes can therefore disappear as a consequence of a structural change that was designed for another purpose.

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How Australian Tax Losses Work & What Allows Them to Carry Forward

The Continuity of Ownership Test Threshold

An offshore restructure can affect the tax loss position even where the commercial owner appears unchanged. For Australian business owners, the Continuity of Ownership Test (COT) requires the same persons to hold more than 50% of the voting, dividend, and capital rights throughout the ownership test period. A change in direct share ownership, or in any of those rights, does not automatically break the test, but the test must be applied to the new structure even where the ultimate beneficial owner is unchanged.

Under Section 165-12 of the ITAA 1997, this test is applied across the ownership test period. That period begins at the start of the income year in which the tax loss arose and ends at the end of the income year in which the company seeks to use it. As a result, a later ownership change can affect an earlier company loss.

The Application of the Business Continuity Test

When the COT cannot be met, the business continuity test can provide an alternative if the company continues the relevant business. The business continuity test is the umbrella term covering:

the same business test under Section 165-210 of the ITAA 1997; and
the similar business test for eligible losses.

The same business test focuses on whether the company continues its business as a whole without deriving income from a new kind of business or transaction. The similar business test, addressed in Law Companion Ruling LCR 2019/1 (‘LCR 2019/1’), permits new activities that evolve from the existing business. However, the overall business identity, activities, and use of assets must remain sufficiently similar; otherwise, the tax loss can be unavailable after the ownership change.

How Capital Losses Are Treated Under the Rules

An offshore restructure can place capital losses at risk on the same basis as revenue tax losses. Under Section 165-93 of the ITAA 1997, the same COT and business continuity test conditions apply when a company seeks to use a net capital loss against later capital gains.

A company holding significant unrealised or accumulated capital losses remains exposed if the ownership test fails and the business continuity test cannot be satisfied.

The Restructuring Changes That Most Commonly Trigger the Loss Rules

Transferring Shares to an Offshore Holding Company

Moving shares in an Australian company to an offshore holding company changes the direct shareholder. This does not automatically mean the losses are lost; the relevant ownership tests still need to be applied.

For Australian business owners, the practical question is whether the new ownership chain preserves the required voting, dividend and capital rights. That needs to be established before the restructure is implemented.

Changing Share Rights in the Australian Company

Issuing new share classes can change the rights attached to shares without changing the names of the shareholders. The affected rights may include:

voting power;
dividend entitlements; or
rights to distributions of capital.

Practically, this matters for Australian business owners because the COT looks at voting, dividend, and capital rights, not just who is named on the share register. Section 165-165 of the ITAA 1997 also limits the calculation to the same shares held by the same persons, so altered rights can place carried-forward company losses at risk even where the shareholders’ names do not change.

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What the Business Continuity Test Can & Cannot Save

The Annual Application of the Business Continuity Test

An Australian company cannot treat the business continuity test as a one-time pass after an ownership change. The business continuity test must be satisfied each year the company wants to apply the losses. A company that passes the test in the year of the ownership change must continue carrying on the same or similar business in every later year it wants to use those losses.

Practically, this matters for Australian business owners because a company may qualify to use a tax loss in one year, then lose access in a later year after changing its business activities. The business continuity test operates through the same business test and the similar business test described earlier.

The Limits of the Business Continuity Test During a Restructure

The business continuity test may not preserve company losses if the company no longer carries on the same or a sufficiently similar business. Moving the operating activity offshore and becoming a passive holding company therefore requires assessment.

Practically, this matters for business owners when an Australian company stops conducting its operating business, retains investments or shares, and seeks to apply earlier tax losses against later income. The company may still exist legally, but that does not mean it continues the same or similar business for the business continuity test.

Case Study on Changing the Identity of the Business

The ATO’s hypothetical Mad Cow Ltd example shows how a complete change in business identity can prevent losses from being saved. After the majority shareholder sold shares, Mad Cow Ltd changed from the “MuBurger” fast food business to “Healthy Food Artists”, with a new brand, logo, restaurant layout, manager, marketing approach, menu, and premium family-restaurant positioning.

Under Paragraph 29 of LCR 2019/1, Mad Cow Ltd failed the similar business test because the change was not an evolution of the former business. The company no longer generated income from the “MuBurger” brand, its identity had changed, and the new activities did not result from developing or commercialising the earlier business, so the carried-forward losses could not be used.

What to Check Before Any Offshore Restructure Is Implemented

Assessing the Value of Carried-Forward Losses

An offshore restructure should not proceed until the company’s carried-forward tax loss position has been reconciled. The records should confirm that the loss amount matches the figures lodged with the Australian Taxation Office (‘ATO’), including any amendments or adjustments from earlier reviews.

The relevant evidence includes:

Loss calculation workpapers supporting how the company loss was calculated.
Tax returns and loss schedules showing when each loss arose.
Records of earlier amendments or audits affecting the amount available.

A discrepancy can leave the company claiming a tax loss that does not match its lodged position, weakening the basis for using that loss after the restructure.

Evaluating the Impact on Ownership & Control

The proposed restructure needs to be tested against the COT before any ownership or control change occurs.

Practically, this matters for Australian business owners when a COT failure requires reliance on the business continuity test, which covers the same business test and the similar business test described earlier. If the restructure changes the company’s business identity or shifts its operating activity offshore, the fallback may not preserve access to the company losses.

Sequencing the Restructure to Preserve Losses

Loss preservation needs to be assessed at the beginning of international offshore company structure design, not after the ownership structure has been settled. The order of the proposed transactions can affect whether the company maintains the required ownership position or must rely on the business continuity test.

The review should compare each proposed change against:

Share ownership: whether a new direct owner is inserted.
Share rights: whether voting, dividend, or capital entitlements change.
Business activity: whether the Australian company continues the same or similar business.

If these issues are left until after implementation, the company may discover that an offshore restructure has removed access to accumulated company losses that the business expected to use against future taxable income, in which case an offshore compliance review and structure remediation may be appropriate.

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Conclusion

Carried-forward tax losses are valuable company assets, but an offshore restructure can put them at risk by changing direct ownership, control, or share rights. Section 165-12 of the ITAA 1997 applies the COT, while the business continuity test may provide an alternative only where the company continues the same or similar business; Section 165-93 applies these conditions to capital losses as well.

Australian business owners considering structural changes should seek tailored advice from WealthSafe’s international offshore company structure design specialists before implementation. WealthSafe helps assess whether the proposed structure preserves available losses, reflects the company’s real business, & remains legally defensible.

Frequently Asked Questions

How long can an Australian company carry forward a tax loss?

An Australian company can carry forward a tax loss indefinitely, provided it satisfies the continuity of ownership test or business continuity test each time it applies the loss. Earlier-year losses must generally be used before later-year losses.

What is the difference between the continuity of ownership test and the business continuity test?

The continuity of ownership test under Section 165-12 of the ITAA 1997 checks whether the same persons held more than 50% of the voting, dividend, and capital rights. The business continuity test is the fallback. It covers the same business test under Section 165-210 and the similar business test under Section 165-211, which examine whether the company continues the same or a sufficiently similar business.

Does an offshore restructure always break the continuity of ownership test?

No, an offshore restructure does not necessarily break the continuity of ownership test. Changes to shareholding, share classes, or control arrangements can cause failure, even where the ultimate beneficial owner remains unchanged.

What records must a company keep to support a carried-forward tax loss?

A company should keep its loss calculation workpapers, relevant tax returns, share registers, ownership records, and evidence of the business activities used to support the business continuity test. These records help show how the loss was calculated and why it remained available.

What happens if a company incorrectly claims a tax loss after a restructure?

An incorrect claim can result in a denied deduction, an amended assessment, penalties based on the error, and a general interest charge. The tax loss may be removed from the year in which it was applied.

Can the similar business test save losses if the company enters a new market?

Yes, the similar business test can preserve losses where new activities or transactions develop from the pre-existing business and the business identity remains sufficiently similar. A new market alone does not decide the outcome.

Do the loss rules apply equally to capital losses and revenue losses?

Yes, Section 165-93 of the ITAA 1997 applies the same continuity of ownership test and business continuity test conditions to capital losses. A company’s net capital loss is subject to those conditions before it can be offset against later capital gains.

How does the same share, same interest rule affect the continuity of ownership test?

Section 165-165 of the ITAA 1997 counts only the same shares held by the same people throughout the relevant period. A change in the shares or their holders can reduce the ownership counted towards the continuity of ownership test.

Must the business continuity test be satisfied every year?

Yes, the business continuity test must be satisfied each year the company wants to apply its tax losses. Passing the test after an ownership change does not remove the need to satisfy it in later years.

Australian Company Shares in an Offshore Trust: Tax Risks

Virna White — Mon, 02 Nov 2026 13:52:46 +0000

Introduction

Moving your Australian company shares into an offshore trust can look like a simple restructuring step, but it triggers immediate capital gains tax & ongoing attribution that are easy to underestimate. The proposed discretionary trust tax changes could also affect the structure’s long-term value.

This article explains what happens at the point of transfer, how dividends & franking credits are treated once the shares sit in the trust, & what to work through before you restructure.

Interactive Tool: Check Your CGT & Tax Risks for Moving Shares Offshore

Offshore Trust Share Transfer Risk Checker

Quickly assess the CGT, trust attribution, and franking credit risks before moving Australian company shares into an offshore trust.

Are you considering transferring Australian company shares to an offshore trust?

Have the shares increased in value since you acquired them?

Do you intend for the offshore trust to retain income (not distribute dividends or gains annually)?

⚠️ CGT Event E1: Upfront Capital Gains Tax Triggered

Transferring shares to a new offshore trust is a disposal for capital gains tax purposes under Section 104-55 of the Income Tax Assessment Act 1997 (Cth). The transfer is valued at market value on the date of transfer—even if no cash changes hands. If the shares have increased in value, you may face an immediate CGT liability.

Additionally, the transferor trust rules in Division 6AAA of the Income Tax Assessment Act 1936 (Cth) can attribute trust income to you annually, even if no distributions are made. A non-resident trust generally cannot claim refunds of excess franking credits.

Section 104-55 of the Income Tax Assessment Act 1997 (Cth)
Division 6AAA of the Income Tax Assessment Act 1936 (Cth)

Speak to a Specialist about Offshore Trust CGT & Attribution Risks

⚠️ CGT Event E2: Upfront Capital Gains Tax Triggered

Transferring shares to an existing offshore trust triggers a disposal for capital gains tax under Section 104-60 of the Income Tax Assessment Act 1997 (Cth). The transfer is valued at market value, and if the shares have appreciated, you may owe CGT immediately.

Ongoing, the transferor trust rules in Division 6AAA of the Income Tax Assessment Act 1936 (Cth) attribute trust income to you each year, regardless of distributions. A non-resident trust generally cannot claim refunds of excess franking credits.

Section 104-60 of the Income Tax Assessment Act 1997 (Cth)
Division 6AAA of the Income Tax Assessment Act 1936 (Cth)

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✅ No Immediate CGT, But Ongoing Attribution & Franking Credit Loss

If your shares have not increased in value, the transfer to an offshore trust may not trigger a capital gain. However, transferor trust rules in Division 6AAA of the Income Tax Assessment Act 1936 (Cth) still apply, meaning you may be taxed annually on attributed income—even if no cash is distributed. A non-resident trust generally cannot claim refunds of excess franking credits.

Division 6AAA of the Income Tax Assessment Act 1936 (Cth)

Talk to our Tax & Asset Protection Team about Ongoing Offshore Trust Risks

⚖️ Explore Your Options: Significant Tax & Compliance Risks

Moving Australian company shares into an offshore trust can trigger immediate CGT and ongoing annual tax under Division 6AAA of the Income Tax Assessment Act 1936 (Cth). A non-resident trust generally cannot claim refunds of excess franking credits, and the government proposes a 30% minimum tax for affected discretionary trusts from 1 July 2028.

Before proceeding, seek specialist advice to ensure your structure remains legal, defensible, and financially viable.

Division 6AAA of the Income Tax Assessment Act 1936 (Cth)

Book a Suitability Assessment with a Specialist

Why This Is More Consequential Than Most Owners Expect

Triggering Immediate Capital Gains Tax Events

Moving Australian company shares into an offshore trust is not just an administrative restructure. Transferring shares to an offshore trust is a disposal for CGT purposes regardless of whether any cash changes hands — CGT Event E1 or E2 triggers at market value at the date of transfer. The tax event arises when the shares move into the trust, rather than waiting for a future sale to a third party.

Practically, this matters for business owners when assessing whether the trust structure is financially worthwhile because the transfer can create an immediate capital gains tax liability before the structure produces any commercial return.

Activating Ongoing Transferor Trust Rules

The transfer does not finish the tax analysis. Once the shares are held through the offshore trust, the transferor trust rules apply on an ongoing basis and change how income and gains from those shares are treated each year.

Australian business owners often assess the structure by looking only at the transfer date, without accounting for the annual taxation of trust income and gains that may follow. Practically, this matters for business owners when dividends or gains arise in the trust because the structure creates a continuing tax consideration rather than a one-off CGT event.

The CGT Event That Happens at the Point of Transfer

Understanding CGT Event E1 & E2

Transferring shares into an offshore trust is not merely an ownership record change. For Australian business owners, a capital gains tax cost can arise before the trust receives any sale proceeds.

The applicable event depends on the trust structure:

CGT Event E1: under Section 104-55 of the Income Tax Assessment Act 1997 (Cth) (‘ITAA 1997’), this applies when a new trust is created over a CGT asset.
CGT Event E2: under Section 104-60 of the ITAA 1997, this applies when a CGT asset is transferred to an existing trust.

Choosing the wrong starting assumption can cause the upfront tax cost of the trust restructure to be assessed incorrectly.

Applying Market Value Substitution

The transfer must be assessed by reference to the shares’ market value at the transfer date. Both CGT Event E1 and CGT Event E2 operate like a disposal, requiring the market value or relevant capital proceeds to be compared with the shares’ cost base to determine whether a capital gain or capital loss arises.

A proper valuation is therefore central before the transfer occurs. Where the shares have increased substantially since acquisition, capital gains tax may be payable on that increase even though the offshore trust has paid no cash for the shares—leaving the transferor with a tax liability that is not funded by sale proceeds.

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What the Transferor Trust Rules Mean After the Transfer

Annual Attribution of Trust Income

Moving Australian company shares into an offshore trust does not end the Australian owner’s tax connection with the income produced by those shares. Under the transferor trust rules in Division 6AAA, a share of the trust’s income may be attributed to the person who transferred the shares each year, even where the trust makes no distribution.

The result is an annual taxation issue for Australian business owners, rather than a liability confined to the transfer date. Income arising from the shares can therefore be attributed to the transferor without cash being received, which can make the trust structure more difficult to assess against its intended purpose.

Assessing the Ongoing Tax Cost

Practically, this matters for business owners when the shares produce income, but the offshore trust retains that income rather than distributing it. The ongoing tax cost must be included in the wider assessment of the trust structure because a restructure that appears manageable at transfer can become more expensive through repeated annual attribution.

How Dividends & Capital Gains Are Treated Once the Shares Are in the Trust

How Offshore Ownership Affects Franking Credits

A non-resident trust generally cannot claim a refund of excess franking credits. This can reduce the value of franked dividends compared with direct ownership by an eligible Australian-resident shareholder.

Withholding Tax & Taxable Australian Property

The trust structure does not remove Australian tax consequences for dividends or a later share sale. Withholding tax may apply to unfranked dividends paid to a non-resident trust. Fully franked dividends are generally exempt from withholding tax.

Australian CGT on a later share sale generally depends on whether the shares are taxable Australian property. Offshore ownership therefore does not, by itself, remove Australian tax exposure.

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The Impact of the 2026 Budget on Trust Structures

The Minimum Tax on Discretionary Trusts

The 2026-27 Budget measures could change the economics of holding Australian company shares through a discretionary trust, whether the trust is offshore or domestic. The government proposes a 30% minimum tax for affected discretionary trusts from 1 July 2028.

For affected trusts, the proposal would change how tax and franking credits are applied. Its effect depends on the trust and beneficiaries, so the proposal needs to be considered in the broader financial comparison.

Changes to the CGT Discount & The Rollover Window

Separately, legislation passed in June 2026 changes how capital gains are taxed through trusts. From 1 July 2027, the 50% capital gains tax discount under Division 115 of the ITAA 1997 will be replaced by cost base indexation and a 30% minimum tax floor for individuals, partnerships, and trusts. Gains accrued before 1 July 2027 retain the 50% discount under transitional rules.

A proposed rollover window would run from 1 July 2027 to 30 June 2030. During that period, a discretionary trust may restructure into a company or fixed trust without triggering income tax or capital gains tax consequences under the proposed relief. If enacted, the rollover could create a planning opportunity, but the window would not remove the need to assess the trust structure, valuations, eligibility conditions and wider taxation effects before a restructure.

What to Work Through Before Any Shares Are Transferred

Calculating the Upfront CGT Cost

The transfer should not proceed until the upfront capital gains tax cost has been calculated using the shares’ market value at the transfer date, as part of offshore trust setup and tax planning for Australian business owners.

Practically, this matters for business owners when the transfer creates a tax liability even though no cash is received for the shares. The analysis must also establish:

whether the transferor trust rules apply;
how much income may be attributed each year; and
whether that ongoing cost makes the trust structure financially workable.

Evaluating the Long-Term Economic Viability

Australian business owners need to assess the trust structure against its intended purpose after all Australian tax implications are included as part of broader international company and offshore structure design for Australians.

The comparison must also allow for the non-resident trust’s general inability to claim refunds of excess franking credits.

In addition, the proposed discretionary trust measures could add further pressure for affected trusts through:

the proposed 30% minimum tax from 1 July 2028; and
the proposed franking credit ordering rule.

The assessment should compare the franking credit position, annual taxation of trust income, future capital gains treatment, and any rollover window, if enacted, to restructure from a discretionary trust to a company or fixed trust between 1 July 2027 and 30 June 2030. If those costs outweigh the intended benefit, the structure may fail to achieve its purpose despite the expense of creating it.

Conclusion

Moving Australian company shares into an offshore trust can create an upfront CGT cost, ongoing Division 6AAA attribution, different taxation of dividends, & possible Australian tax on later gains. The non-resident trust’s general inability to claim refunds of excess franking credits, together with the proposed 30% minimum tax for affected discretionary trusts from 1 July 2028, could materially change the trust structure’s economics.

Before restructuring, contact WealthSafe’s offshore trust setup specialists to consider the full tax implications, timing, valuation, & available rollover options. WealthSafe helps business owners develop structures that remain legal, defensible, & consistent with how the business actually operates.

Frequently Asked Questions

What CGT event applies when transferring shares to a new offshore trust?

CGT Event E1 applies when shares are transferred to a newly created offshore trust under Section 104-55 of the ITAA 1997. The event treats the transfer as a disposal for capital gains tax purposes.

Does CGT Event A1 apply when moving shares to an existing trust?

No, CGT Event A1 under Section 104-10 of the ITAA 1997 applies to a disposal such as a sale to a third party. Moving shares to an existing trust triggers CGT Event E2 under Section 104-60 of the ITAA 1997.

How is the transfer of shares to an offshore trust valued for tax purposes?

The transfer is valued at the shares’ market value on the transfer date, even if no cash changes hands. This market value substitution determines the capital gain or loss for CGT Event E1 or E2.

Can an offshore trust claim a refund for franking credits?

Generally not. A non-resident trust generally cannot claim a refund of excess franking credits, which can reduce the value of franked dividends compared with direct ownership by an eligible Australian-resident shareholder.

What is the proposed minimum tax for discretionary trusts from 2028?

The government proposes a 30% minimum tax for affected discretionary trusts from 1 July 2028, payable at trustee level. The measure has been introduced to Parliament but is not yet law.

How would the proposed changes affect franking credits for trusts?

For affected trusts, the proposal would require trustees to apply available franking credits against the minimum tax, and corporate beneficiaries could not claim credits for tax paid by the trustee. Its effect depends on the trust and its beneficiaries.

What happens to the capital gains tax discount after July 2027?

From 1 July 2027, the 50% capital gains tax discount is replaced by cost base indexation & a 30% minimum tax floor. Gains accrued before 1 July 2027 retain the 50% discount under transitional rules.

What is the proposed rollover window for restructuring trusts?

A proposed rollover window would run from 1 July 2027 to 30 June 2030. If enacted, it would allow affected trusts to restructure into companies or fixed trusts without triggering income tax consequences, including capital gains tax.

Are capital gains on shares held by an offshore trust still subject to Australian tax?

It depends. Australian CGT on a later share sale generally depends on whether the shares are taxable Australian property, so offshore ownership does not, by itself, remove Australian tax exposure.

When Must an Offshore Company Register with ASIC?

Virna White — Mon, 02 Nov 2026 13:49:35 +0000

Introduction

If your offshore company is about to do anything in Australia, it is easy to assume that registration only matters once revenue or a physical office appears. The real tension is that a foreign company must be registered with the Australian Securities and Investments Commission (ASIC), or have a registration application pending, before carrying on business in Australia, regardless of scale.

This article explains what “carrying on business” means under the Corporations Act 2001 (Cth) (‘Corporations Act’), what registration involves, and the consequences of operating without it so you can decide whether a registered foreign company or a separate Australian entity fits your plans.

Interactive Tool: Check If Your Offshore Company Must Register With ASIC

ASIC Offshore Company Registration Checker

Quickly assess if your offshore company must register with ASIC before starting business in Australia—and avoid penalties.

Has your offshore company established or used a registered office, place of business, or share transfer/registration office in Australia?

Are your Australian activities limited to holding meetings, maintaining a bank account, or conducting isolated transactions (under 31 days, not repeated)?

⚠️ ASIC Registration Required

Your offshore company must be registered with ASIC, or have an application pending, before carrying on business in Australia.

Under Section 601CD(1) of the Corporations Act 2001 (Cth), establishing a physical presence or conducting ongoing commercial activities triggers the registration requirement. Carrying on business without registration or a pending application can expose the company to fines.

Ensure you appoint a local agent, set up a registered office, and prepare all required documents (including Form 402 and certified attachments) to comply.

Legal References:

Section 21(1) of the Corporations Act 2001 (Cth)
Section 601CD(1) of the Corporations Act 2001 (Cth)
Section 1311 of the Corporations Act 2001 (Cth)
Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164
Hope v Bathurst City Council (1980) 144 CLR 1

Speak to a Specialist about Offshore Company Registration

✅ No ASIC Registration Required (for these activities)

Your current Australian activities are excluded from the ASIC registration requirement.

Section 21(3) of the Corporations Act 2001 (Cth) excludes holding meetings, maintaining a bank account, or isolated transactions (under 31 days, not repeated) from being classified as ‘carrying on business’.

However, if your activities expand beyond these exclusions, registration may be required.

Legal References:

Section 21(3) of the Corporations Act 2001 (Cth)

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⚖️ Marketplace/3PL Arrangements Require Review

Selling exclusively through an independent online marketplace or using third-party logistics may not trigger ASIC registration, but control over pricing, fulfilment, or customer terms could change the assessment.

The substance of your Australian operations matters more than labels. If your company controls key aspects of the business in Australia, you may still be ‘carrying on business’ and need to register.

Legal References:

Section 21(3)(d) of the Corporations Act 2001 (Cth)
Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164
Hope v Bathurst City Council (1980) 144 CLR 1

Talk to Our Tax & Asset Protection Team for a Compliance Review

⚠️ Ongoing or Repeated Activities: Registration Likely Required

Ongoing or repeated commercial activities in Australia generally mean your offshore company must be registered with ASIC, or have an application pending, before carrying on business.

Section 21(1) and Section 601CD(1) of the Corporations Act 2001 (Cth) apply where there is continuity, system, and commercial character to the activities. Carrying on business without registration or a pending application can expose the company to fines.

Legal References:

Section 21(1) of the Corporations Act 2001 (Cth)
Section 601CD(1) of the Corporations Act 2001 (Cth)
Section 1311 of the Corporations Act 2001 (Cth)
Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164
Hope v Bathurst City Council (1980) 144 CLR 1

Speak to a Specialist about ASIC Compliance and Structuring

Why This Question Matters Before Your Offshore Company Does Anything in Australia

When Registration Is Required

An offshore company entering the Australian market cannot treat ASIC registration as paperwork to complete after operations begin. A foreign company must be registered, or have a registration application pending, before carrying on business in Australia under section 601CD(1) of the Corporations Act.

Carrying on business without registration or a pending application can breach that requirement. Misunderstanding it does not remove the compliance risk.

The Absence of a Revenue Threshold

The size of the Australian activity does not decide whether company registration is required. There is no revenue threshold for the ASIC registration requirement — an offshore company must be registered, or have an application pending, before carrying on business in Australia, regardless of the scale of its Australian activities.

The relevant question concerns the nature and manner of the activities, rather than the amount earned. A low-revenue offshore company may still need ASIC registration where its Australian operations amount to carrying on business. This leaves Australian companies with no safe dollar figure below which ASIC compliance can be disregarded.

Distinguishing ASIC Registration from Permanent Establishment

ASIC registration and a permanent establishment are separate questions, even though both examine aspects of an international company’s Australian activities. ASIC registration is assessed under Part 5B.2 of the Corporations Act, including the carrying-on-business framework. A tax treaty permanent establishment is assessed under the applicable double tax agreement, typically using OECD Model Article 5.

A company can trigger the ASIC registration requirement without having a permanent establishment, or have a permanent establishment without triggering ASIC registration. Treating the taxation analysis as a substitute for company registration can leave an offshore company operating in Australia outside the required ASIC compliance framework.

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What Carrying on Business in Australia Actually Means

Activities That Can Trigger Registration

For Australian business owners, ASIC registration turns on what an offshore company actually does in Australia, not merely on the existence of Australian customers. Under sections 21(1) and (2) of the Corporations Act, a company is treated as carrying on business where it has a place of business in Australia or undertakes certain specified activities. The result depends on the company’s actual Australian activities.

The relevant activities include situations where an offshore company:

Establishes or uses a registered office or place of business in Australia;
Establishes or uses a share transfer or registration office in Australia; or
Administers, manages or deals with Australian property as an agent, legal personal representative or trustee.

A leased office, regularly used co-working space or company-operated warehouse can be a place of business. A third-party logistics provider’s warehouse belongs to the provider, while a website alone is not a place of business. The risk is that an offshore company can cross the ASIC registration threshold through its Australian operating footprint before its revenue appears significant.

Activities That Do Not Trigger Registration on Their Own

Some Australian activity does not, on its own, amount to carrying on business. Section 21(3) of the Corporations Act excludes activities such as:

Holding internal director or shareholder meetings;
Maintaining a bank account;
Investing company funds or holding property; and
Completing an isolated transaction within 31 days, unless it forms part of repeated similar transactions.

Other exclusions cover proceedings, sales through independent contractors, orders that become binding outside Australia, debt evidence or security enforcement. The exclusions must apply exclusively; activities extending beyond the listed categories are not protected by these exclusions. Australian business owners can therefore mistake a limited exclusion for protection covering a wider Australian operation.

Applying the Whole-Facts Assessment for E-Commerce & Digital Businesses

An online sales model does not resolve the ASIC question by itself. Where the listed activities and exclusions do not settle the issue, the assessment considers:

permanence.
continuity.
commercial character.
physical presence.
personnel.
agents.
transaction activity.
fulfilment arrangements.
Australian decision-making.

Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164 (‘Luckins’) described carrying on business as usually involving a succession of acts designed to advance an enterprise with a view to pecuniary gain. Hope v Bathurst City Council (1980) 144 CLR 1 (‘Hope’) described it as activity undertaken as a commercial enterprise on a continuous and repetitive basis. A marketplace or third-party logistics provider may support a different result where it operates independently, but control over pricing, customer terms, inventory, fulfilment, local support or contracts can point towards an Australian business presence. The consequence is that labels such as “marketplace seller” or “3PL arrangement” cannot replace an assessment of the commercial substance.

What Registering as a Foreign Company With ASIC Involves

Appointing a Local Agent & Establishing a Registered Office

For Australian business owners, the local agent is a central part of the ASIC company registration process, not a nominal contact. Under the Corporations Act, every registered foreign company must maintain at least one local agent who is an individual ordinarily residing in Australia or an Australian company authorised to accept service of process and notices.

The appointment is recorded through Form 418, supported by the agent’s signed consent. The registered office must be a physical Australian street address, not a PO Box, with access during business hours. If the premises are not owned by the offshore company, the occupier’s written consent is required.

A vacant local agent role or inaccessible office can leave the offshore company in breach of its ASIC compliance obligations.

Preparing Form 402 & Mandatory Certified Attachments

The registration process depends on a complete paper application, not just the Form 402 itself. Form 402 is the application for registration as a foreign company under Part 5B.2 of the Corporations Act, with processing taking up to 28 days.

The required materials include:

Certified certificate of incorporation or equivalent, dated within three months of lodgement.
Certified constitution or governing documents, including all amendments.
Form 418, appointing the local agent.
Memorandum of Directors’ Powers, where an Australian-resident director or local board is involved.
Director details, registered office information, and occupier consent where applicable.

The registration fee is $636 for 2026–27, payable by cheque or money order for paper lodgement. Incorrect certification, missing amendments, or incomplete director information can delay or lead to refusal of the company registration application.

Managing Ongoing Annual Compliance & Financial Reporting

ASIC registration does not end when the offshore company receives its Australian Registered Body Number (ARBN). The Corporations Act framework requires continuing compliance, including displaying the ARBN on public documents, correspondence, business premises, and alongside the company name and country of origin.

Registered foreign companies must also maintain their local agent and registered office, notify ASIC of changes to directors, the registered office, company name, or constitution, and lodge annual returns or financial statements. The annual Form 405 or Form 406 lodgement fee is $1,583 for 2026–27, with late fees applying separately.

Missing financial reporting or change notifications can create further ASIC compliance costs, delay business administration, or contribute to deregistration risk.

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What Happens If Your Offshore Company Operates in Australia Without Registering

Financial Penalties for Non-Registration

The cost of treating ASIC compliance as an administrative detail can escalate quickly for Australian business owners.

Breaching the registration requirement can expose the company to fines. Local agents can also face personal liability for certain compliance failures, so the exposure is not confined to the offshore company.

What to Work Out Before Your Offshore Company Starts Any Australian Activity

Assessing Whether Planned Activities Trigger Registration

The key decision for Australian business owners is whether the planned Australian activity is limited enough to avoid company registration, or whether it amounts to carrying on business. The assessment turns on the nature, frequency, continuity and commercial substance of the activity, including whether the offshore company will:

use an Australian office;
employ staff;
engage dependent agents;
enter contracts as principal; or
conduct ongoing commercial operations.

If the activity amounts to carrying on business, the company must be registered, or have an application pending, before it starts. A formal assessment before committing resources can identify the registration process, local agent, registered office and ongoing compliance obligations. Without that assessment, the offshore company may begin operating while outside the ASIC compliance framework.

Comparing a Registered Foreign Company with an Australian Subsidiary

The choice between a registered foreign company and an Australian subsidiary is a central part of international company offshore structure design, affecting liability, administration, director requirements and setup time. A registered foreign company operates as a branch of the offshore company, so the foreign parent:

bears full liability;
requires a local agent;
does not require an Australian-resident director; and
typically takes 10–28 days to establish.

An Australian subsidiary is a separate legal entity with liability generally limited to the subsidiary. It requires at least one Australian-resident director, and does not require a local agent. Incorporation can take 1–2 days, yet it creates a separate business structure with its own governance requirements. Selecting the wrong option can leave the offshore company with greater liability or create a more complex compliance burden than the Australian activity requires.

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Conclusion

For Australian business owners, the central question is whether an offshore company’s Australian activities amount to carrying on business, rather than how much revenue the company earns. If they do, the company must be registered, or have a registration application pending, before that business begins. This involves a Form 402 registration process, local-agent duties & ongoing ASIC compliance.

Before Australian operations begin, consider discussing the registration position, branch or subsidiary structure & compliance obligations with WealthSafe’s specialists in international company offshore structure design. WealthSafe helps business owners develop legally compliant, properly documented structures that reflect the company’s real activities.

Frequently Asked Questions

Does an offshore company need to register with ASIC if it has no Australian revenue?

Yes, an offshore company may need to register if it carries on business in Australia, regardless of Australian revenue. Section 601CD(1) of the Corporations Act focuses on the nature and manner of the activities, not their dollar value.

When must an offshore company register with ASIC?

A foreign company must be registered, or have a registration application pending, before it starts carrying on business in Australia. Carrying on business without either can breach Section 601CD(1) of the Corporations Act.

Does having an Australian bank account mean the offshore company is carrying on business?

No, maintaining a bank account does not, by itself, amount to carrying on business in Australia. Section 21(3) of the Corporations Act expressly excludes that activity, although other Australian activities may change the assessment.

What is the difference between a registered foreign company and an Australian subsidiary?

A registered foreign company operates as a branch without separate legal personality, so the foreign parent bears full liability. An Australian subsidiary is a separate legal entity, with liability generally limited to the subsidiary.

Who can act as a local agent for a registered foreign company?

A local agent must be an individual ordinarily residing in Australia or an Australian company. Under Sections 601CF, 601CG and 601CJ of the Corporations Act, the agent accepts service of process, is answerable for the company’s compliance, and may face personal liability.

Can an unregistered foreign company enforce contracts in an Australian court?

No, an unregistered foreign company cannot maintain a proceeding in an Australian court to enforce its contracts. Section 601CG of the Corporations Act sets out this restriction.

Does selling through an online marketplace automatically trigger ASIC registration?

No, selling exclusively through an independent online marketplace does not by itself trigger ASIC registration. Section 21(3)(d) of the Corporations Act may apply where the platform is genuinely independent, but the company’s control over pricing, customer terms and fulfilment remains relevant.

What documents are required to lodge Form 402 with ASIC?

Form 402 requires a certified certificate of incorporation, certified constitutional documents, Form 418 appointing the local agent, and a memorandum of directors’ powers where applicable. The application may also require consent from the registered office occupier.

Does avoiding a permanent establishment for tax purposes mean ASIC registration is not required?

No, avoiding a permanent establishment does not remove the ASIC registration requirement. Registration under Part 5B.2, Section 21 of the Corporations Act and a tax treaty permanent establishment are separate tests, so one may apply without the other.

Do Offshore Companies Need to Charge GST in Australia?

Virna White — Mon, 02 Nov 2026 13:46:12 +0000

Introduction

It is easy to assume that incorporating your company offshore removes your Goods & Services Tax (GST) obligations when selling to Australian customers. Australian GST follows the supply, not the supplier’s location, so an offshore company can still be required to charge GST on digital products & services sold to Australian consumers.

This article explains when an offshore company must charge GST on Australian sales, which supply types are covered, & when the business-to-business (B2B) carve-out means GST is not charged on sales to GST-registered Australian businesses buying for their business.

Interactive Tool: Check If Your Offshore Company Must Register & Charge GST

Offshore GST Exposure Checker

Quickly check if your offshore company must register, charge, or remit Australian GST on sales to Australian customers.

What type of product or service is your offshore company supplying to Australian customers?

Who are your primary Australian customers?

What is your projected or actual turnover from Australian-connected sales in the last or next 12 months?

Do you sell via an Electronic Distribution Platform (EDP) like Amazon, eBay, or an app store?

✅ GST Registration Required

Your offshore company must register for GST in Australia and charge 10% GST on taxable sales to Australian consumers. This applies because your supplies (digital products/services, LVIG, or goods held in Australia) are connected with Australia, your turnover meets the AUD 75,000 threshold, and your customers include Australian consumers.

Registration can be completed via the simplified GST system if you are a non-resident supplier.

Refer to Section 9-25 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) and ATO guidance on imported services and digital products.

Speak to a Specialist about GST Registration & Compliance

⚖️ B2B Carve-Out Applies

If your Australian customers are GST-registered businesses who acquire the supply for their business, and they provide their ABN and confirm their GST registration, you generally do not charge GST on those supplies. These sales are generally excluded from the GST turnover threshold calculation.

Ensure you retain evidence of your customers’ GST status, business use and ABN for compliance.

See Section 84-100 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) for the B2B carve-out.

Talk to our Offshore Tax & Asset Protection Team about B2B GST Compliance

⚠️ Below GST Registration Threshold

Your offshore company’s Australian-connected sales are below the AUD 75,000 threshold. You are not currently required to register for GST, but you must monitor your turnover closely. If you approach or exceed the threshold, registration becomes mandatory.

See Section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) for registration requirements.

Book a Strategy Call to Monitor GST Exposure

✅ EDP Platform Handles GST

If all Australian sales are made via an Electronic Distribution Platform (EDP) such as Amazon, eBay, or an app store, and the EDP collects and remits GST, your offshore company may not need to register separately for GST on those sales.

However, you must confirm the platform’s GST arrangements and keep records to avoid duplicate reporting or missed obligations.

Refer to Section 84-55 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth).

Speak to a Specialist about EDP GST Compliance

❌ No GST Obligation Detected

Based on your answers, your offshore company does not currently have a GST obligation for Australian sales. This may be because you do not supply relevant goods or services, or your sales are not connected with Australia.

Continue to review your business model regularly, as changes in supply type, customer base, or turnover can trigger GST requirements.

Talk to our Offshore Tax & Asset Protection Team for a Compliance Review

Why GST Can Still Apply Even When Your Company Is Offshore

The Destination Principle for Australian Sales

An offshore structure does not decide where GST belongs; the customer’s consumption does. Australia adopted the destination principle, meaning GST is imposed where goods or services are consumed rather than where the supplier is located.

For Australian business owners, this affects global tax planning. Australian GST rules can capture sales made by an offshore company to customers consuming digital products, digital services, or other taxable goods and services in Australia.

The result is a GST treatment driven by the destination of the supply, not the company’s place of incorporation.

The Irrelevance of Supplier Location

An offshore company does not need physical operations in Australia before Australian GST can apply to its sales. Australian GST applies to supplies of digital products, imported services, and low-value goods made to Australian consumers, regardless of where the supplying entity is incorporated.

This means a foreign digital service provider may need to charge GST on sales to Australian consumers once the relevant registration threshold is reached. If the supplier location is treated as the deciding factor, the company can miss its GST obligations, leave tax uncollected, and face penalties or administrative procedures when the Australian Taxation Office (ATO) reviews the position.

How Australia’s GST Rules Apply to Offshore Suppliers

Taxable Supplies Made in Connection With Australia

The offshore company’s location does not decide the Australian GST treatment. GST applies to taxable supplies connected with Australia, including:

digital products;
digital services;
imported services;
low-value goods; and
goods sold from stock held in Australia.

The connection must be assessed by looking at the Australian sales included in the business model, the customer’s status, and the type of goods or services supplied. For Australian business owners, failing to obtain offshore company tax advice for GST compliance can lead to missed registration, incorrect GST treatment, or GST amounts being paid from the company’s own margin.

The Role of Electronic Distribution Platforms

Selling through an Electronic Distribution Platform (EDP), such as an app store or online marketplace, can shift the GST collection duty away from the individual offshore seller. The EDP operator may collect and remit GST where it controls key parts of the transaction, including payment processing and delivery.

Practically, this matters for business owners when marketplace sales form part of an offshore company’s Australian revenue. A platform may assume the collection duty, but assuming every platform sale is covered can produce incorrect GST records, duplicated reporting, or an unaddressed obligation where the platform does not control the relevant transaction.

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The Types of Supplies That Trigger a GST Obligation for an Offshore Company

Digital Products & Imported Services

Australian business owners need to classify digital products and services before assuming an offshore entity can sell without charging GST.

From 1 July 2017, the GST rules have applied to imported digital products and services supplied to Australian consumers. Covered supplies include:

Digital products: software, streaming content, e-books, music, apps, games, online courses, webinars, subscriptions, and online advertising.
Digital services: consulting, website design, publishing, legal, accounting, architectural, professional membership, and other services delivered electronically.

A streaming TV subscription supplied by an overseas company to an Australian resident can therefore include GST on the monthly invoice. The exposure is not limited to traditional digital product sellers: digital service providers must also assess whether their services supplied to Australia are taxable. If the supplies are made to Australian consumers, failing to apply the correct GST treatment can leave the offshore company responsible for uncollected GST.

Low Value Imported Goods

Physical products do not fall outside the GST rules merely because they are shipped from overseas. Low Value Imported Goods (LVIG) are goods with a customs value of AUD 1,000 or less, where the rules have applied to sales to Australian consumers since 1 July 2018.

The GST is charged at checkout rather than collected at the border. Responsibility can sit with:

The offshore seller: where the seller makes direct sales and meets the GST registration threshold.
An EDP operator: where the sale occurs through an online marketplace such as Amazon or eBay.
A redeliverer: in some parcel-forwarding arrangements.

Alcohol and tobacco are excluded from these checkout collection rules, with GST collected at the border instead. Where an EDP operator collects the GST, the seller must understand which sales the platform has already reported; incorrect treatment can create duplicate reporting or leave the wrong party responsible for the tax.

Defining the Australian Consumer

The consumer test determines whether a sale is subject to GST, so customer records matter as much as the product itself. An Australian consumer is an Australian resident who is either not registered for GST, or is registered but does not acquire the supply for its business. A GST-registered business buying for its business falls outside this consumer definition, provided its status is properly confirmed.

Customer location and registration status may be assessed using:

Customer self-declarations;
Credit card billing details;
IP addresses or other geolocation indicators.

An offshore company selling a digital service to an Australian business should distinguish between a GST-registered customer and an individual or unregistered business. If the business customer provides its Australian Business Number (ABN) and confirms it is GST-registered and acquiring the supply for its business, the supply is treated differently; weak evidence can produce the wrong GST treatment, including GST being charged where it should not be or omitted from a consumer sale.

The Registration Threshold & When the Obligation Actually Kicks In

Calculating the AUD 75,000 Turnover Threshold

An offshore entity must register for GST with the ATO when its turnover from supplies connected with Australia reaches or exceeds AUD 75,000 over a twelve-month period. The threshold applies to non-resident businesses based on Australian-connected sales, not the jurisdiction where the entity is incorporated. For Australian business owners, missing the point at which the threshold is met can delay registration while taxable sales continue.

The calculation looks at GST turnover connected with Australia, excluding the following:

GST itself;
most sales to GST-registered Australian businesses that acquire the supply for their business;
input-taxed sales; and
some other excluded amounts.

Once the threshold is exceeded, the offshore entity may need to charge GST on taxable sales to Australian consumers. This creates an exposure that does not disappear because the company operates offshore.

What Counts Toward the GST Threshold

The threshold includes:

digital products and digital services sold to Australian consumers, such as software, streaming, online courses, apps, and consulting;
low value imported goods worth AUD 1,000 or less; and
goods sold from stock held in Australia, including stock stored in a third-party warehouse or fulfilment centre.

These sales categories need to be tracked separately because they can bring an offshore entity to the AUD 75,000 limit even where the company has no Australian office. Failure to include taxable Australian sales can lead to:

late registration;
late filing penalties;
mistakes in returns; and
GST being paid from the entity’s own margin rather than collected from customers.

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The B2B Carve-Out & Simplified Registration System For Offshore Entities

When the B2B Carve-Out Applies

The B2B carve-out can change the GST treatment, pricing, and threshold position for an offshore entity selling to an Australian business. Where the customer is registered for GST and acquires the supply for its business, it is not an Australian consumer, so the offshore company generally does not charge GST on that supply.

Sales that fall within the carve-out generally do not count toward the GST turnover threshold. However, the offshore entity must retain evidence of the customer’s ABN, GST registration and business use. Without that evidence, the supply may receive Australian consumer treatment, creating an unexpected obligation to charge GST.

Registering Through the Simplified GST System

The simplified GST system gives non-resident digital service providers a narrower registration pathway when Australian consumer sales meet the AUD 75,000 threshold. An offshore company that meets the threshold can register through the ATO’s simplified GST system. In this system, an Australian Reference Number (ARN) is issued instead of an ABN, and the simplified system is pay-only with no input tax credits.

The system can cover:

digital products;
digital services; and
low value imported goods sold to Australian consumers.

It involves quarterly GST lodgments, with GST paid in Australian dollars. However, it is not suitable for a business importing goods into Australia for storage before sale; that model requires standard registration. The cost of choosing the wrong registration type can include an inability to claim GST credits or the need to restructure GST reporting.

Understanding the Reverse Charge Mechanism

The reverse-charge shifts the GST assessment from the offshore supplier to the Australian purchaser in some service transactions. Where an Australian GST-registered business with limited credit entitlement buys services from an offshore supplier, the purchaser may need to self-assess 10% GST and include that amount in its Business Activity Statement (BAS).

A purchaser using the imported service for a taxable business purpose may claim the GST as an input tax credit in the same BAS. This means the offshore supplier’s invoice treatment does not, by itself, settle the Australian GST position. The purchaser’s registration status, credit entitlement, and use of the services can affect the required GST treatment.

What to Work Out Before Your Offshore Company Starts Selling to Australian Customers

Assessing Supply Types & Threshold Projections

Australian business owners need to identify what the offshore company will actually sell to Australian consumers when considering international offshore company structure design.

This means working out whether the supply is a digital product, digital service, imported service, or low value imported good.

The projected GST turnover must then be tested against the AUD 75,000 threshold, including relevant Australian sales over the past or expected twelve-month period.

Customer status also affects the calculation. Sales to GST-registered Australian businesses may fall outside the Australian consumer definition when the customer provides an ABN and confirms it is GST-registered and buying for its business.

If taxable sales are missed or the threshold is assessed too late, the company may face retrospective GST liabilities, penalties, or the need to fund uncollected GST from its own margin.

Determining Pricing & Compliance Strategies

Pricing must account for whether the offshore company needs to charge GST on taxable sales to Australian consumers. A registered supplier using the simplified GST system applies 10% GST, lodges a simplified quarterly return, pays in Australian dollars, and cannot claim GST credits.

The commercial model also needs to reflect the entity’s ongoing lodgment obligations. Relevant records must support:

customer location;
GST registration status;
Australian sales;
pricing; and
GST collected.

The ATO expects GST returns and payments to be handled on time. A failure to build GST into pricing or reporting can reduce the company’s margin and create penalties for late registration, late filing, or incorrect returns.

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Conclusion

An offshore incorporation does not remove Australian GST where digital products, imported services, or low value imported goods are supplied to Australian consumers; the relevant question is where consumption occurs, not where the entity is registered. The AUD 75,000 threshold, Australian consumer test, B2B carve-out, EDP responsibility, and simplified GST system—with an ARN, quarterly returns, and no input tax credits—shape whether the company must charge GST and register.

Australian business owners considering offshore sales to Australia should discuss the structure with WealthSafe before launch. WealthSafe helps create a properly documented GST position that is defensible and aligned with the supplies, customers, and operations—contact WealthSafe’s specialists for offshore company tax advice to discuss your position.

Frequently Asked Questions

What is the registration threshold for an offshore company?

An offshore entity must register for GST when its GST turnover connected with Australia reaches or exceeds AUD 75,000 in a twelve-month period. The threshold can include digital products, imported services, low value imported goods, & goods sold from stock held in Australia.

Does an offshore company charge GST to Australian businesses?

Generally not, where the Australian business is registered for GST & acquires the supply for its business. That supply falls outside the Australian consumer definition, so the offshore company does not charge GST on it. The customer’s ABN & a declaration of its GST registration & business use support this treatment.

What are low value imported goods?

LVIG are physical items with a customs value of AUD 1,000 or less that are sold to Australian consumers from overseas. GST is charged at checkout rather than collected at the border.

Can an offshore company claim GST credits under the simplified system?

No, the simplified GST system does not allow an offshore company to claim input tax credits. Simplified GST registration is a pay-only system for non-resident suppliers.

Who is responsible for GST when selling through an Electronic Distribution Platform?

The EDP operator may be responsible for collecting & remitting GST when it controls key parts of the transaction. This can reduce the compliance burden for the individual offshore supplier.

How does an offshore company identify an Australian consumer?

An Australian consumer is an Australian resident who is not registered for GST, or is registered but does not acquire the supply for its business. Customer declarations, credit card billing addresses, IP addresses, & other location information can support the GST treatment.

What happens if an offshore company fails to register?

The Australian Taxation Office may impose penalties for late registration, late lodgment, or errors in GST returns. The offshore company may also need to pay uncollected GST from its own margin.

Does an offshore company need an Australian Business Number to register?

No, an offshore company using the simplified GST system does not need an ABN. The Australian Taxation Office issues an ARN for managing quarterly lodgments.

Are any goods excluded from the Low Value Imported Goods rules?

Yes, alcohol & tobacco are excluded from the checkout collection rules. GST is collected at the border for those goods.

Offshore Companies Hiring in Australia: Staff & Contractor Rules

Virna White — Mon, 02 Nov 2026 13:42:26 +0000

Introduction

If you are using an offshore company to engage Australian workers, it is easy to assume that incorporating overseas keeps local employment, payroll, and superannuation obligations at arm’s length. The reality is that Australian obligations follow where the worker is located and where the work is performed, not where the employer is incorporated.

This article explains what happens when your offshore entity engages staff or contractors in Australia, why the employee-versus-contractor distinction matters, and how the permanent establishment risk can reshape your structure.

Interactive Tool: Check If Your Offshore Company Must Follow Australian Employer Rules

Offshore Employer Australian Compliance Checker

Quickly check if your offshore company must comply with Australian payroll, superannuation, and employment laws when engaging staff or contractors in Australia.

Is your offshore company planning to engage staff or contractors who will perform work physically in Australia?

Will the working arrangement involve fixed hours, ongoing roles, or instructions from your company?

Will your Australian-based staff or contractors negotiate contracts or perform core business functions for the offshore company?

⚖️ Full Australian Employer Obligations Apply

Because your offshore company is engaging staff or contractors who work in Australia, and the working relationship is employee-like, you must comply with Australian payroll, superannuation, and employment laws. This includes PAYG withholding, Single Touch Payroll, superannuation guarantee (including Payday Super), workers compensation insurance, and all minimum entitlements under the Fair Work Act 2009 (Cth). Misclassification can lead to civil penalties, and intentional underpayment can also be a criminal offence under the Fair Work Act 2009 (Cth).

Permanent establishment risk may also arise if your Australian staff perform core business functions or habitually conclude contracts, which can lead to Australian corporate tax and ASIC registration requirements.

📋 Section 15AA of the Fair Work Act 2009 (Cth)

📋 David Sanderson v Brightest Australia Pty Ltd [2026] FWC 1633

Talk to our Tax, Wealth & Residency Strategy Team

⚠️ Contractor Arrangements: Review Required

Even if you intend to engage contractors, Australian authorities (ATO, Fair Work, payroll tax) will assess the real substance of the relationship. If the arrangement is genuinely independent, you may avoid some employer obligations, but risks remain if the relationship is not truly arm’s length.

Misclassification can lead to civil penalties, and intentional underpayment can also be a criminal offence. Always review contractor arrangements for compliance with Fair Work Act 2009 (Cth) and ATO guidance.

📋 Section 15AA of the Fair Work Act 2009 (Cth)

Book a Strategy Call with a Specialist

✅ No Australian Employer Obligations (for Offshore-Only Work)

If all work is performed outside Australia and no staff or contractors are located in Australia, your offshore company is generally not subject to Australian employer obligations. However, review your arrangements regularly to ensure no Australian presence is created inadvertently.

Speak to a Specialist about Offshore Structuring

Why Engaging Australian Workers Through an Offshore Entity Is Not Straightforward

The Flawed Assumption About Offshore Incorporation

An offshore company does not avoid Australian employer obligations merely because its incorporation documents sit overseas. Australian PAYG withholding, superannuation guarantee, and Fair Work obligations follow where the worker is located and where the work is performed — not where the employer is incorporated. As a result, an offshore company engaging Australian workers in Australia faces the full Australian employer compliance framework.

For Australian business owners, the structure can therefore require an Australian employer compliance framework covering:

payroll;
tax reporting;
superannuation;
workplace rights;
leave entitlements;
workers compensation insurance; and
Single Touch Payroll.

Practically, this matters for business owners when an offshore entity is treated as a shortcut around Australian obligations because the resulting payroll, tax, and employment exposure can be missed from the beginning.

Case Study on Extraterritorial Reach Involving David Sanderson

An offshore work location does not, by itself, decide whether Australian workplace protections apply. In David Sanderson v Brightest Australia Pty Ltd [2026] FWC 1633 ('Sanderson'), the Fair Work Commission found that an employee who lived and worked wholly in New Zealand was an Australian-based employee for the purposes of the unfair dismissal provisions of the Fair Work Act 2009 (Cth) ('Fair Work Act'). This was because the employment contract was formed when acceptance was received by the Australian employer in Victoria.

The decision concerned an Australian constitutional corporation, not an offshore company engaging Australian workers in Australia. Its significance is the mirror principle: Australian workplace laws can reach beyond physical borders, so an offshore entity cannot treat incorporation location as a complete answer to Australian workplace rights and obligations.

Why the Distinction Between Employees & Contractors Matters for Your Offshore Entity

Understanding the Real Substance of the Working Relationship

For Australian business owners, the employee or contractor label is not enough to determine the offshore entity's Australian employer obligations. For Fair Work purposes, the whole of relationship test considers factors including:

the degree of control;
independence;
commercial risk;
delegation;
the ongoing nature of the role; and
how the arrangement operates day to day.

Section 15AA of the Fair Work Act applies a whole of relationship test focused on the real substance, practical reality and true nature of the relationship. A worker with fixed hours, an ongoing internal role, detailed instructions, no genuine ability to delegate, or dependence on one business may be treated as an employee despite a contractor agreement. Tax and superannuation rules require a separate assessment. A contractor label alone does not settle the offshore entity's obligations.

When Misclassification Can Lead to Criminal Underpayment

Treating an Australian employee as an overseas contractor can create compounding legal problems for the offshore entity. Misclassification can lead to civil penalties. Intentional underpayment can also be a criminal offence under the Fair Work Act.

The risk does not depend only on the contract wording. The Australian Taxation Office (ATO), Fair Work and state payroll tax authorities apply separate assessments. A classification mistake can therefore make payroll, superannuation, tax obligations and workplace rights harder to correct after the relationship has begun.

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The Australian Obligations That Arise When an Offshore Company Engages Local Workers

Navigating PAYG Withholding & Single Touch Payroll

An offshore entity paying salary or wages to staff in Australia must operate an Australian payroll system. Pay As You Go (PAYG) withholding requires tax to be withheld from employee payments, paid to the ATO by the relevant due dates, reported through a Business Activity Statement or Instalment Activity Statement, and supported by accurate payroll records.

Single Touch Payroll (STP) requires salary, PAYG withholding and superannuation information to be reported to the ATO each time employees are paid. In practice, this means an offshore company must build local payroll capability rather than treating Australian staff payments as ordinary foreign expenses.

Meeting Superannuation Guarantee & Payday Super Deadlines

Australian employers must make compulsory superannuation guarantee contributions for eligible employees at a rate of at least 12% of qualifying earnings. The offshore entity must also provide a default superannuation fund and ensure contributions are paid correctly to the nominated fund.

Payday Super commenced on 1 July 2026, requiring contributions to reach the employee's superannuation fund within seven business days of each payday. In practice, delayed payments create a failure to meet superannuation obligations, while a foreign payroll process may not be configured for the shorter payment cycle.

Complying With the Fair Work Act & National Employment Standards

An offshore company employing staff in Australia must provide the workplace rights established by the Fair Work Act, including minimum wages, working hours, workplace protections, flexible working arrangements and discrimination protections. The National Employment Standards also provide minimum entitlements that cannot be reduced by an employment contract, award, or enterprise agreement.

These entitlements include:

annual leave;
personal or sick leave;
carer's leave;
parental leave; and
Australian public holidays.

In practice, this matters for Australian business owners when an offshore employment agreement does not match the workplace rights and obligations applying to an Australian employee.

Managing Workers Compensation & Fringe Benefits Tax

Workers compensation insurance is compulsory for employers in every Australian state and territory. The offshore entity must arrange cover under the applicable workers compensation scheme. For staff working across states or territories, the state-of-connection rules determine where cover is required. Failure to maintain required cover can result in significant penalties and legal consequences.

A non-resident employer providing benefits outside regular salary or wages may also have Fringe Benefits Tax (FBT) obligations. Taxable benefits can include:

private use of company vehicles;
car parking benefits; and
certain entertainment expenses.

These require calculation of the liability, an annual FBT return and payment of required tax to the ATO.

The Permanent Establishment Risk That Comes With Having Australian Workers

How Core Business Functions Create a Taxable Presence

An offshore entity can create an Australian tax presence through the work performed by its Australian staff, even when the entity itself is incorporated overseas. Australian business owners face permanent establishment exposure when local workers perform core business functions from a fixed location or habitually conclude contracts for the offshore entity.

Practically, this matters for business owners when an offshore staffing model starts carrying out revenue-generating work or committing the foreign entity to contracts from Australia.

The Structural Consequences of Triggering Permanent Establishment

A permanent establishment changes the offshore entity's Australian compliance position. The business may need to manage Australian corporate tax obligations, register with the Australian Securities & Investments Commission (ASIC), obtain an Australian Business Number (ABN), then file an Australian tax return.

Practically, this matters for business owners when a structure intended to operate without an Australian entity develops local filing, registration, tax reporting obligations. The offshore company can then face the administrative burden of an Australian operating presence, making the original structure more difficult to maintain without further review.

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What to Resolve Before Your Offshore Entity Engages Anyone in Australia

Assessing Permanent Establishment & Classification Risks Early

The proposed role should be assessed before recruitment, not after Australian workers receive access to the business. The review should examine whether the arrangement creates a permanent establishment, whether the worker negotiates contracts or performs core business functions, and whether the relationship is genuinely independent contracting.

For Fair Work purposes, worker classification depends on the real working relationship rather than the contract label. For Australian business owners, getting this assessment wrong can create classification exposure alongside the tax questions connected with the worker's role.

Evaluating the Need for an Australian Operating Entity

An offshore entity should establish which obligations arise before engaging staff in Australia. The assessment turns on several factors, including:

the paying entity and the worker's residency;
where services are performed;
whether Australian PAYG withholding is required;
whether superannuation applies; and
whether a local taxable presence exists.

Those questions can inform whether an Australian operating entity is a more appropriate structure than having the offshore company engage workers directly. Advice on international company offshore structure design before hiring is less costly than unwinding a structure after payroll, tax, and employer obligations have been built around it, leaving Australian business owners with less flexibility to change the arrangement.

Conclusion

An offshore company engaging staff in Australia remains exposed to Australian employer obligations, including PAYG withholding, superannuation, STP, workers compensation, workplace rights under the Fair Work Act, & potential permanent establishment consequences. Worker classification also matters: treating an employee as an independent contractor can create serious legal exposure, while compliant systems must be established before hiring begins.

This is a long-term structural decision affecting payroll, tax reporting, employment arrangements, & how the offshore entity operates. Australian business owners considering this arrangement should discuss the proposed structure with WealthSafe before commitments are made. WealthSafe helps create lawful, defensible structures through international company offshore structure design that is consistent with the business's real operations.

Frequently Asked Questions

Can an offshore company legally employ staff in Australia?

Yes, an offshore company can legally employ staff in Australia. It must meet Australian workplace, leave, PAYG withholding, superannuation and payroll reporting obligations.

Does the Fair Work Act apply to offshore companies employing Australian workers?

Yes, the Fair Work Act applies to Australian-based employees, regardless of where the employer is incorporated. Minimum employment standards and workplace protections cannot be removed by a foreign governing-law clause.

What are the superannuation obligations for offshore entities with Australian staff?

Offshore entities must pay at least 12% of an eligible employee's qualifying earnings into a nominated superannuation fund. The employer must also provide a default superannuation fund and pay contributions correctly and on time.

How do the Payday Super rules affect offshore companies?

Payday Super applies to offshore companies employing Australian workers from 1 July 2026. Superannuation contributions must reach the employee's fund within seven business days of each pay run.

What happens if an offshore company misclassifies an Australian employee as a contractor?

Misclassification can lead to civil penalties, and intentional underpayment can also be a criminal offence under the Fair Work Act. For Fair Work purposes, the whole of relationship test looks at the real substance, practical reality and true nature of the relationship. Tax and superannuation rules require a separate assessment.

Do offshore companies need to register for PAYG withholding in Australia?

Yes, an offshore company employing Australian staff must register for PAYG withholding. It must withhold tax from salary payments, pay those amounts to the ATO by the due dates and complete the required reporting.

What triggers a permanent establishment for an offshore company in Australia?

A permanent establishment can arise when Australian workers perform core business functions from a fixed location or habitually conclude contracts for the offshore entity. This can create Australian corporate tax obligations, ASIC registration, an ABN and an Australian tax return requirement.

Are offshore companies required to provide workers compensation insurance in Australia?

Yes, workers compensation insurance is compulsory for employers in every Australian state and territory. The offshore company must arrange cover under the applicable workers compensation scheme. For staff working across states or territories, the state-of-connection rules determine where cover is required.

Does an offshore company need to use Single Touch Payroll for Australian workers?

Yes, STP is mandatory for employers paying Australian staff. Each pay run must report salary, PAYG withholding and superannuation information to the ATO.

When Australian Companies Create a Permanent Establishment Overseas

Virna White — Mon, 02 Nov 2026 13:38:16 +0000

Introduction

Expanding your Australian company offshore can feel like a simple step, yet a foreign country may gain the right to tax your profits without you ever opening a formal office or branch. A permanent establishment can arise without you intending it — through a home office, a local representative, or a local employee with contract authority.

This article explains what triggers a permanent establishment overseas, which activities are excluded, & what to assess before your business sets up any foreign presence.

Interactive Tool: Check If Your Overseas Activities Trigger Foreign Tax

Permanent Establishment Risk Checker

Quickly assess if your Australian company’s overseas activities may trigger foreign tax and compliance obligations.

1 of 3 | What type of overseas activity is your Australian company planning or currently undertaking?

2 of 3 | How long will your overseas presence or project last (or has it lasted)?

3 of 3 | Will any overseas employee or agent work from a home office for at least 50% of their time over 12 months, and is there a genuine commercial reason for their presence?

⚠️ Permanent Establishment Risk Likely

Based on your answers, your overseas activities may create a permanent establishment (PE) under Section 6(1) of the Income Tax Assessment Act 1936 (Cth) and relevant double tax agreements. This can occur if you operate from a fixed place of business (including a home office with commercial justification) or use a dependent agent with contract authority.

Foreign tax and compliance obligations may apply, including local registration, profit attribution using arm’s length principles, and ongoing reporting.

Professional review is essential before proceeding.

Section 6(1) of the Income Tax Assessment Act 1936 (Cth)
Taxation Ruling TR 2001/11
Section 815-C of the Income Tax Assessment Act 1997 (Cth)
OECD Model Tax Convention Article 5(5)

Speak to a Specialist about your overseas permanent establishment risk

✅ Permanent Establishment Unlikely (Low Risk)

Your described activities are limited to preparatory or auxiliary functions (such as market research, storage, or liaison work) and do not appear to cross the threshold for a permanent establishment under most double tax agreements.

However, if these activities become core business functions or are part of a cohesive business operation (see the Multilateral Instrument anti-fragmentation rule), PE risk may still arise.

Keep detailed records and monitor any changes in your overseas operations.

Section 6(1) of the Income Tax Assessment Act 1936 (Cth)
Multilateral Instrument Article 13
OECD Model Tax Convention Article 5

Talk to our Offshore Tax & Asset Protection Team for a compliance review

⚠️ Home Office May Trigger Permanent Establishment

The OECD‘s November 2025 update to the Article 5 Commentary provides guidance that a remote employee’s home office is more likely to create a PE where: (1) they work from home at least 50% of the time over 12 months, and (2) there is a genuine commercial reason for their presence.

Where both factors are present, foreign tax and compliance obligations may arise, depending on the country and any applicable tax treaty.

Review your remote work arrangements with a specialist to ensure compliance.

OECD Model Tax Convention Article 5 Commentary (Nov 2025)
Section 6(1) of the Income Tax Assessment Act 1936 (Cth)

Book a Strategy Call with a Specialist to review your remote work risk

⚖️ Duration-Dependent – Specialist Review Recommended

If your overseas presence is short-term or its duration is uncertain, you may still face permanent establishment risk depending on the country, any applicable tax treaty and how your activities evolve.

Foreign tax authorities may assess the substance of your operations, not just the labels or intentions.

It is strongly recommended to seek specialist advice before making any commitments.

Section 6(1) of the Income Tax Assessment Act 1936 (Cth)
OECD Model Tax Convention Article 5 and the relevant double tax agreement

Book a Strategy Call with our Offshore Tax & Asset Protection Team

What a Permanent Establishment Is & Why It Matters for Your Australian Business

Defining the Threshold for Foreign Taxation

An Australian company can face foreign taxation once its overseas activities amount to a permanent establishment (PE) — a fixed place of business through which the enterprise carries on all or part of its business. This can include a place of management, branch, office, factory or workshop, rather than only a separately registered office address.

Section 6(1) of the Income Tax Assessment Act 1936 (Cth) (‘ITAA 1936’) defines a PE as a place at or through which a person carries on business. Australia’s double tax agreements use a broader treaty concept built around a fixed place of business, with the foreign country’s taxing rights limited to profits attributable to the PE. For Australian business owners, the threshold matters because a business can create a taxable presence without a separate foreign entity.

The Risk of Unintended Tax Obligations

The structure on paper does not determine the result by itself. A PE can arise without the company intending it — through an ongoing overseas business presence, a local representative, or activities carried on without a formal branch or office. The actual substance of the Australian company’s overseas operations remains central to the analysis.

Once a PE exists, the foreign country may tax the profits attributable to that overseas presence, while Australian tax obligations can continue to apply to the Australian company. The consequences can include:

an unexpected foreign tax liability;
additional reporting requirements; or
retroactive assessments if the PE was not identified earlier.

A registered office address alone does not resolve the position, particularly where the business operates without a physical branch but carries on substantive activity overseas.

ATO Guidance on Double Tax Agreements

The Australian Taxation Office (‘ATO’) updated its PE guidance on 24 June 2026, including its explanation of how Australia’s double tax agreements apply when an Australian enterprise operates through an overseas PE. The key point is that the foreign country’s taxing right is limited to the profits attributable to that PE, rather than the Australian company’s entire worldwide income.

Those profits are calculated using arm’s length principles, which require the overseas operation to be assessed by reference to:

the functions it performs;
the assets it uses; and
the risks it assumes.

The ATO refers to Taxation Ruling TR 2001/11 Income tax: international transfer pricing (‘TR 2001/11’) for further information about attribution rules. For Australian business owners, weak profit allocation records can make it harder to support which income belongs to the overseas PE rather than the Australian business.

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The Two Main Ways an Australian Company Can Create a Permanent Establishment

Operating Through a Fixed Place of Business

An Australian company can create a PE by carrying on business through a stable physical location in the foreign country. This can include:

an office, branch, warehouse, workshop, or retail premises; or
another facility used regularly for business activities.

A place usually needs a degree of permanence. The required duration depends on the country and any applicable tax treaty.

The risk is that an Australian company may create foreign tax exposure before recognising that its physical presence has crossed the relevant threshold.

Engaging a Dependent Agent Overseas

Foreign premises are not required where a person in the foreign country acts as a dependent agent for an Australian company. A dependent agent PE can arise where the person:

acts for the company;
habitually exercises authority to conclude contracts in the company’s name; or
concludes contracts binding on the company,

provided the activities are not limited to preparatory or auxiliary work.

An agent is treated differently where the agent is legally and economically independent, and then acts in the ordinary course of its own business. The distinction turns on the representative’s:

actual authority;
conduct;
economic independence; and
relationship with the Australian company,

rather than the label used in service agreements or employment contracts. This is where an overseas sales representative or local manager can create a PE without a physical office, leaving Australian business owners with foreign tax exposure they did not plan for.

The Impact of the OECD 2025 Home Office Update

The OECD Model Tax Convention on Income and on Capital (‘OECD’) update released on 19 November 2025 gives businesses a clearer framework for assessing remote employees’ home offices. The OECD’s update to the Article 5 Commentary provides guidance on home office PE. An Australian company with overseas remote employees needs to consider whether their home offices constitute a fixed place of business through which the Australian company’s business is carried on.

The first factor is whether the employee works from the home office for at least 50 per cent of total working time over a rolling 12-month period. The second is whether there is a genuine commercial reason for the employee’s presence in that country, such as:

regular local client interaction;
supplier oversight;
meaningful time-zone coverage; or
collaboration with local institutions.

Employee preference, talent retention, or office cost savings do not qualify as commercial reasons on their own. As a result, remote work arrangements can require closer review where the threshold is approached or exceeded.

The Activities That Trigger a Permanent Establishment & The Ones That Do Not

Common Triggers for Overseas Tax Exposure

The key question for an Australian company is not where a document is signed, but where substantive business activity is carried on.

High-risk activities include:

Dedicated premises: maintaining an office, branch, warehouse or other location used as a regular business base.
Contract authority: employing staff or representatives who habitually conclude contracts, or play the principal role leading to contracts routinely accepted by the company.
Long-term projects: carrying out construction or installation work beyond the time threshold in the relevant double tax agreement.

Practically, this matters for Australian business owners when an Australian business expands overseas through staff, premises or projects without assessing the substance of those activities. The result can be a taxable presence without a physical branch being formally registered.

The Preparatory & Auxiliary Activities Exception

Not every overseas activity creates a PE. Activities that are purely preparatory or auxiliary are generally excluded, including:

market research;
information gathering;
storage;
display;
delivery; or
liaison-only work.

However, where the activity is the company’s core business function, the preparatory exception does not apply.

The distinction depends on what the location actually does for the Australian company. A small liaison office that only gathers information may fall within the exclusion, while a facility that performs the business’s central revenue-generating function may not.

Practically, this matters for Australian business owners when an activity is described as “marketing“, “storage” or “research” but also supports regular order fulfilment, contract activity or another substantive function. A label that does not match the operation can leave the intended exception unavailable.

Understanding the Multilateral Instrument Anti-Fragmentation Rule

Splitting overseas activities between locations does not necessarily keep each activity outside the PE threshold. The Multilateral Instrument anti-fragmentation rule can examine activities together where separate locations perform parts of a cohesive business operation.

This can matter where an Australian company divides functions such as:

Storage or delivery at one location;
Information gathering or liaison at another location; or
Sales, order fulfilment or contract activity elsewhere.

Practically, this matters for Australian business owners when each individual function appears preparatory or auxiliary, but the combined arrangement performs a connected business purpose. Fragmentation can therefore fail to prevent PE exposure, leaving the business with foreign tax and compliance consequences it had not planned for.

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What Happens Once a Permanent Establishment Exists for Your Australian Business

Foreign Taxation Rights & Profit Attribution

An Australian company with an overseas PE can become taxable in the foreign country on the profits attributable to that overseas operation. The existence of a PE does not mean the foreign country taxes the company’s worldwide profits; the taxing right is limited to the profit connected with the PE.

Those profits are calculated using arm’s length principles, supported by a functional analysis of the activities performed, assets used and risks assumed at the overseas location. The allocation must be supported by separate accounting records and evidence, rather than determined by the registered office address or the company’s preferred allocation. If the records do not reflect the overseas business activity, the Australian business may face disputed profit allocations, additional foreign tax and double-tax exposure.

Registration & Ongoing Compliance Obligations

A PE creates more than a tax assessment issue: the Australian company can also face local registration and filing obligations in the foreign country. These can include:

obtaining a local tax identification number;
lodging annual income tax returns;
reporting the PE’s income and expenses;
managing withholding obligations for employees or contractors; and
meeting indirect tax requirements where the relevant threshold is exceeded.

The compliance burden also extends to transfer pricing documentation and ongoing records supporting dealings between the PE and the Australian head office. An undisclosed PE can lead to prior-year assessments, penalties and interest, while incomplete records make it harder to establish which profits belong to the foreign operation.

What to Assess Before Your Australian Business Sets Up Overseas

Evaluating Planned Activities Against Tax Treaties

An Australian company should assess its planned overseas activities before committing to premises, personnel, or contract arrangements. The relevant double tax agreement determines whether the foreign country can tax profits attributable to a PE. In practice, the actual substance of the activity matters more than a registered office address or contractual label.

The assessment should focus on whether the proposed arrangement involves:

A fixed place of business through which the Australian company carries on business; or
A dependent agent who habitually concludes contracts, or plays the principal role leading to contracts routinely concluded without material modification.

If a PE exists, the foreign country may tax the profits attributed to it under arm’s length principles. Australia may still tax the company’s income, with relief potentially available through a Foreign Income Tax Offset where the relevant treaty conditions are met. This is where an overseas expansion can create an additional tax and compliance burden without a separate foreign entity or traditional office.

Choosing Between a Branch & a Separate Foreign Subsidiary

For Australian businesses, the choice between a branch and a separate foreign subsidiary is central to international company and offshore structure design and changes the starting point for PE analysis.

A branch is an extension of the Australian company rather than a separate entity, so it will generally create a PE in that country.

A separate foreign subsidiary is a distinct legal entity and does not, by itself, create a PE for the Australian parent. The risk changes if the subsidiary’s premises or personnel act as a dependent agent for the Australian company by habitually exercising authority to conclude contracts on its behalf.

The structural trade-off is clear: a branch will generally create a PE, while a subsidiary may provide a separate legal structure but does not remove exposure where the actual relationship operates through dependent-agent activities.

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Conclusion

For Australian business owners, an Australian company expanding offshore must assess whether its operations create a PE through a fixed place, a dependent agent, or a remote employee’s home office. The consequences can include foreign taxation of attributable profits, arm’s-length profit allocation and local registration and filing obligations. A branch will generally create a PE, while a subsidiary does not automatically create one for the Australian parent.

Australian business owners considering an overseas presence should discuss the proposed structure with WealthSafe’s international company and offshore structure design specialists before operations begin. WealthSafe helps shape a legal, defensible structure that matches the business’s actual activities, control & reporting obligations.

Frequently Asked Questions

What is the time threshold for creating a fixed place permanent establishment?

A fixed place of business usually needs a degree of permanence, but there is no single time threshold. The required duration depends on the country and any applicable tax treaty. Construction projects are also subject to the time threshold in the relevant double tax agreement.

Can an overseas remote employee working from home create a permanent establishment?

Yes, an overseas remote employee can create a PE for an Australian company. The OECD’s November 2025 update to the Article 5 Commentary provides guidance on two factors: whether the employee works from home for at least 50 per cent of total working time over a rolling 12-month period, & whether there is a genuine commercial reason for the employee’s presence in that country.

Does registering a foreign company automatically create a permanent establishment?

No, registering a foreign company does not by itself create a PE for the Australian parent. The substance of the activities, physical presence & contractual authority matter, including whether the foreign subsidiary acts as a dependent agent.

How does the Multilateral Instrument anti-fragmentation rule affect overseas expansion?

The Multilateral Instrument anti-fragmentation rule can treat separate auxiliary activities as one cohesive business operation. Splitting activities across overseas locations may not prevent a PE where the combined activities form part of that operation.

What is the difference between an independent agent & a dependent agent?

An independent agent is legally & economically independent and acts in the ordinary course of its own business, so it usually does not create a PE. A dependent agent can create one under OECD Model Tax Convention Article 5(5) when the agent habitually exercises authority to conclude contracts for the Australian company.

Can an Australian company create a permanent establishment without intending to?

Yes, a PE can arise without the company intending it through a home office, a local representative with contract authority, or a local employee habitually concluding contracts on the company’s behalf, without any formal branch or office. An undisclosed presence can lead to retroactive tax assessments, penalties & additional compliance obligations.

How are profits attributed to an overseas permanent establishment?

Profits are attributed using arm’s length principles under Section 815-C of the Income Tax Assessment Act 1997 (Cth) (‘ITAA 1997’). The analysis considers the functions performed, assets used & risks assumed at the overseas location, supported by records showing the relevant income & expenses.

Do preparatory or auxiliary activities trigger a permanent establishment?

Purely preparatory or auxiliary activities, such as market research, information gathering or liaison work, are usually excluded under the relevant treaty. Section 6(1) of the ITAA 1936 contains a broader domestic definition without specific exclusions, so the applicable treaty position matters.

How do double tax agreements prevent double taxation on overseas business profits?

A double tax agreement allocates taxing rights between Australia & the foreign country where the PE operates. When foreign tax is paid on attributable profits, Australia usually provides relief through a Foreign Income Tax Offset.

Understanding Australia’s Transferor Trust Rules Before Putting Assets into a Foreign Trust

Virna White — Mon, 02 Nov 2026 13:34:33 +0000

Introduction

Moving property or services into a foreign trust can look like a clean way to defer Australian tax until the trust pays something out. The transferor trust rules are built to stop exactly that, taxing you on the trust’s income as it arises whether or not any distribution is ever made.

This article explains who the rules catch, what counts as a transfer, and the attribution consequence that follows for Australian business owners considering a foreign trust.

Interactive Tool: Check If Your Foreign Trust Transfer Could Trigger Australian Tax

Transferor Trust Exposure Checker

Quickly assess if your foreign trust plans could trigger Division 6AAA attribution and Australian tax—even if no distribution is made.

Are you (or your entity) an Australian resident planning to transfer property, money, or services to a foreign trust?

What type of value are you transferring to the foreign trust?

Is the foreign trust located in a listed or unlisted country (for Australian tax purposes)?

✅ No Transferor Trust Exposure

Based on your answers, you are not an Australian resident transferring property or services to a foreign trust. The transferor trust rules under Division 6AAA of the Income Tax Assessment Act 1936 (Cth) do not apply.

Note: If your circumstances change, or if you become an Australian resident or make a transfer, you should reassess your position.

Reference: Division 6AAA of the Income Tax Assessment Act 1936 (Cth)

Speak to a Specialist about Offshore Tax Planning

⚖️ Potential Attribution: Listed Country Trust

Your planned transfer to a foreign trust in a listed country may still trigger attribution under Division 6AAA of the Income Tax Assessment Act 1936 (Cth). Only designated concession income is included, but you may still face Australian tax on certain trust income—even if no distribution is made.

Action: Review the trust’s records and country status with a specialist to ensure compliance and avoid unexpected tax.

Reference: Division 6AAA and Section 102AAB of the Income Tax Assessment Act 1936 (Cth)

Talk to our Offshore Tax & Asset Protection Team

⚠️ High Risk: Unlisted Country Trust Exposure

Transferring value to a foreign trust in an unlisted country can trigger full attribution of all trust income and gains to you as the transferor, under Division 6AAA of the Income Tax Assessment Act 1936 (Cth). This can result in significant Australian tax—even if you receive no distribution.

Action: Seek specialist advice before proceeding. The rules are strict and the tax consequences can be severe.

Reference: Division 6AAA and Section 102AAB of the Income Tax Assessment Act 1936 (Cth)

Book a Strategy Call with a Specialist

❌ Insufficient Information: Deemed Attribution Likely

If you cannot obtain sufficient information about the foreign trust, a deemed rate of return may be applied to the value transferred, under Division 6AAA of the Income Tax Assessment Act 1936 (Cth) and Section 8AAD(2) of the Taxation Administration Act 1953 (Cth). This can result in Australian tax based on a statutory formula, regardless of actual trust income.

Action: Do not proceed without specialist advice and documentation.

References: Division 6AAA and Section 102AAB of the Income Tax Assessment Act 1936 (Cth); Section 8AAD(2) of the Taxation Administration Act 1953 (Cth)

Speak to a Specialist Before Transferring Assets

What Are the Transferor Trust Rules — & Why Do They Exist?

The Core Purpose of Division 6AAA

An offshore trust can otherwise allow an Australian resident to move income-producing assets overseas, leave profits within the foreign trust, and delay Australian taxation until a distribution is made. Division 6AAA of the Income Tax Assessment Act 1936 (‘ITAA 1936‘) addresses that deferral by attributing certain profits to the resident transferor, even where no distribution has been received.

Where a foreign trust is funded with assets or other value, the transferor trust rules are directed at taxing the trust’s income rather than allowing accumulated foreign income to remain outside assessable income until extraction. The intended offshore deferral can therefore fail at the point the trust earns income.

Closing the Offshore Tax Deferral Gap

The central consequence is timing: the transferor trust rules tax the Australian transferor on the foreign trust’s attributable income as it arises each year — not when the trust distributes, and not if it never distributes. This separates the tax outcome from the transferor’s decision to retain profits within the trust.

This is most significant where a foreign trust accumulates foreign income for reinvestment or later distributions. The income can be included in the transferor’s assessable income for the relevant income year, despite no cash having reached the transferor. The trust’s retained income can therefore create Australian tax payable before any distribution is available.

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Who the Rules Apply To — & What Counts as a Transfer

Identifying an Attributable Taxpayer

The key question is not whether a foreign trust has made a distribution. It is whether an Australian resident has transferred property or services to a non-resident trust estate. Under the ITAA 1936, the profits of that trust may be attributed to the resident transferor, even where no distribution has been received.

The resident transferor becomes an attributable taxpayer when attributable income is assigned to that person. The rule can apply to:

a transfer to a non-resident discretionary trust estate; or
a transfer to a non-discretionary trust estate for no consideration or less than an arm’s-length amount.

As a result, moving value into a foreign trust does not, by itself, keep the resulting foreign income outside Australian tax.

The Broad Definition of a Transfer

A cash contribution is only one possible form of transfer. A “transfer” under Section 102AAB of the ITAA 1936 is broader than a cash contribution, and can include:

loans to the trust;
guarantees on behalf of the trust;
services provided below market value; and
indirect transfers through interposed entities.

The relevant question is whether property or services have moved into, or for the benefit of, the non-resident trust estate.

Treating a transaction as commercial paperwork will not remove the risk if the underlying value transferred does not reflect an arm’s-length arrangement.

Deemed Transfers & Interposed Entities

Routing value through another entity does not necessarily keep the original transferor outside the rules. Where a partnership transfers property or services to a non-resident trust estate, each partner is deemed to have made a transfer in proportion to that partner’s interest in the partnership.

A similar result can apply where an Australian trust or controlled foreign trust transfers property or services to the non-resident trust estate. Each person who transferred property or services to the first trust may be deemed to have transferred them to the second trust. A transfer through a company, partnership or trust that later ceases to exist can also be attributed to a person who benefited from it.

An interposed entity can add complexity without removing transferor trust exposure, so international company offshore structure design should be assessed alongside the trust structure.

What Happens Once the Rules Apply — Income Attributed Whether or Not Received

The Accruals Basis of Taxation

A foreign trust does not need to make a distribution before Australian tax can arise. As explained above, the rules apply an accruals basis: the transferor is taxed on attributable income as it arises, not when the trust distributes.

The key risk is that retained foreign income can still enter assessable income before cash is available personally. A structure intended to accumulate foreign income without distributions can still create Australian tax payable for the transferor in the relevant income year.

Calculating Attributable Income

The amount attributed is based on the trust estate’s net income, calculated as though the non-resident trust estate were an Australian resident and taxpayer. The calculation therefore considers the trust’s income, gains, relevant deductions, foreign tax, Australian tax, and other amounts that may be excluded under the transferor trust measures.

The treatment also depends on whether the trust estate is in a listed or unlisted country:

Listed country trust estate: eligible designated concession income is taken into account, while other income is treated as exempt income.
Unlisted country trust estate: all income or gains are included when working out net income.

The amount of attributable income may differ materially according to the trust’s country classification. If sufficient trust information cannot be obtained, a deemed rate of return may instead be applied to the adjusted market value of transferred property or services.

A Practical Example of Income Attribution

Consider a case where an Australian business owner transfers AUD 500,000 to a Cayman trust. If the trust earns AUD 50,000 in Year 1, the transferor trust rules can require that AUD 50,000 to be included in the transferor’s assessable income for that income year, even if the trust retains the full amount.

The tax result is driven by the trust’s attributable income, not by the amount distributed. Australian tax can therefore become payable while the AUD 50,000 remains inside the foreign trust, leaving the transferor to fund the tax without receiving a corresponding distribution.

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How the Transferor Trust Rules Interact With Other Australian Tax Rules

Independence from Controlled Foreign Company Rules

An offshore trust does not leave Australian tax analysis merely because Controlled Foreign Company (CFC) rules do not apply. Division 6AAA of the ITAA 1936 operates independently, so an Australian resident who transfers property or services to a non-resident trust estate can have attributable income included in assessable income even where the CFC measures do not apply.

When calculating attributable income, the CFC measures are expressly excluded from the rules used to determine the non-resident trust estate’s net income. The result for Australian business owners is a separate transferor trust exposure that cannot be assessed only by asking whether a CFC exists.

The Separate Application of Section 99B

Treating a later distribution as the only Australian tax event creates a separate exposure. Section 99B of the ITAA 1936 applies when foreign trust property is paid to, or applied for the benefit of, an Australian resident beneficiary, with the amount included in assessable income in the income year it is received, subject to statutory exceptions.

The transferor trust accruals rules and Section 99B are separate rules that can apply independently. An Australian business owner may therefore face:

Division 6AAA attribution on undistributed income; and
Section 99B assessment when a distribution is eventually received.

Section 99B of the ITAA 1936 excludes amounts already included in assessable income under the transferor trust provisions, but the source, nature, timing and prior taxation of the payment still matter.

Increased Scrutiny Under Recent ATO Guidelines

Foreign trust arrangements now sit within a more clearly stated ATO compliance focus. Practical Compliance Guideline 2024/3 (‘PCG 2024/3‘) , titled Section 99B of the Income Tax Assessment Act 1936 — ATO compliance approach, identifies documentation the ATO may request to establish the source of trust money or assets, while Taxation Determination 2024/9 (‘TD 2024/9‘) addresses factors relevant to exceptions under Section 99B of the ITAA 1936.

The guidance is not a replacement for the legislation, but missing records can make it harder to establish that an exception applies. For Australian business owners, distributions from foreign trusts can therefore create both an assessable income issue and an evidence problem when trust deeds, accounts, resolutions, or source records are incomplete.

What to Work Through Before Transferring Anything to a Foreign Trust

Assessing the Application of Division 6AAA

The first decision is whether the proposed transfer could make an Australian business owner an attributable taxpayer, as described above. That analysis depends on the transfer, the type of trust and any applicable exemption. An arm’s-length payment does not automatically put a transfer to a foreign discretionary trust outside the rules.

The broad transfer definition under Section 102AAB of the ITAA 1936 means a loan, guarantee, below-market service, or a transfer routed through a partnership, company, or another trust can still create exposure.

If this analysis is missed, the structure may create transferor trust exposure before any distribution is made, so obtaining foreign trust setup and structuring advice before proceeding is important.

Evaluating the Tax Cost of Attributed Income

The projected tax cost depends on how the foreign trust’s attributable income is calculated, as set out above. This should be weighed before assuming retained foreign income can remain outside Australian tax until distribution, because the transferor trust measures can attribute income as it arises during the income year.

The treatment then turns on the trust’s country status. A listed country trust estate generally includes only eligible designated concession income, while an unlisted country trust estate includes all income or gains in its net income, which can produce a harsher Australian tax result.

Because attributable income is worked out as though the trust estate were an Australian resident taxpayer, the expected Australian tax payable needs to be projected before assets or services are transferred.

Ensuring the Structure Achieves Its Intended Purpose

A foreign trust may look suitable on a diagram yet fail to deliver its intended result once the following are examined together:

attributable income;
Australian tax;
foreign tax;
documentation;
control; and
distributions.

This becomes a central issue where the commercial purpose depends on accumulating income offshore without immediate Australian taxation.

The transferor trust rules are a highly technical area of Australian international taxation. The structure may become more difficult to manage if the following are not assessed together:

the trust’s country status;
transferred value;
income records; or
the Australian residency position.

Specialist advice is important because a structure that does not account for these tax consequences can leave the transferor with Australian assessable income despite receiving no distribution.

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Conclusion

For Australian business owners, the central issue is whether transferring property or services to a foreign trust creates Division 6AAA exposure, even when no distribution is received. The transferor trust rules attribute income as it arises, while Section 99B of the ITAA 1936 addresses distributions or benefits received later; listed or unlisted country treatment, available records, exemptions & residency timing can shape the result.

If a foreign trust is being considered, discuss the proposed transfer, residency position & expected distributions with WealthSafe’s offshore trust setup specialists for tailored advice. WealthSafe helps develop a compliant, defensible structure that reflects the trust’s funding, income attribution & distribution position.

Frequently Asked Questions

What is the main difference between Division 6AAA and section 99B?

Division 6AAA taxes the transferor on attributable income from a foreign trust as it arises, whether or not the trust makes a distribution. Section 99B of the ITAA 1936 applies when an Australian resident beneficiary receives trust property or a benefit, subject to stated exceptions.

Can a loan to a foreign trust trigger the transferor trust rules?

Yes, a loan to a foreign trust can be treated as a transfer under the broad definition in Section 102AAB of the ITAA 1936. The transferor trust rules can apply even where the value provided is not a cash gift.

Are there any exemptions to the transferor trust rules?

Yes, exemptions can apply to transfers involving public unit trusts, certain deceased estates, non-resident family trusts, discretionary trust estates, or non-discretionary trust estates. Each exemption depends on conditions such as the trust type, arm’s-length terms, residency, control, and the purpose of the transfer.

How is the attributable income of a foreign trust calculated?

The attributable income is based on the trust estate’s net income calculated as though it were an Australian resident and taxpayer. A listed country trust estate generally includes eligible designated concession income, while an unlisted country trust estate includes all income or gains in its net income.

What happens if there is not enough information to calculate the attributable income?

A deemed amount must be included in assessable income when the required trust information cannot reasonably be obtained. The amount uses the adjusted market value of the transferred property or services multiplied by a deemed rate of return set at 5% above the applicable rate under Section 8AAD(2) of the Taxation Administration Act 1953 (Cth) (‘TAA 1953’).

Does the transferor trust rule apply if the foreign trust never makes a distribution?

Yes, the transferor trust rules can tax attributable income as it arises during each income year, even if the foreign trust never makes a distribution. The tax outcome is not deferred until the transferor receives trust property.

What is the de minimis exemption?

The de minimis exemption can apply to listed country trust estates where total attributable income across the relevant trust estates is no more than the lesser of $20,000 or 10% of their total net incomes. Attributable income from unlisted country trust estates remains included.

How do the rules apply for a part-year Australian resident?

The attributable income included in assessable income is reduced according to the number of days the transferor was an Australian resident during the relevant income year. The calculation applies the resident days as a proportion of the total days in the relevant period.

Why is the ATO increasing scrutiny on foreign trusts?

The ATO has issued PCG 2024/3 and TD 2024/9 on the application of Section 99B of the ITAA 1936 to payments, assets, and benefits from foreign trusts. These publications reflect closer examination of the source of trust property, prior taxation, trust corpus, and records supporting an exclusion.