Director / Trustee / Shareholder while living overseas - issues?

Discussion in 'Legal Issues' started by money, 15th Apr, 2022.

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  1. money

    money Well-Known Member

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    Will there be any issues in the below sample scenarios from a legal or tax point of view?

    Jack and Jill are both Oz citizens and residents.

    1. They are going to setup a company where Jack is the sole director and the shareholders are both Jack and Jill, to get the benefits of a company tax rate of 25% for their business.

    2. They are going to setup a discretionary trust where Jack is a personal trustee with Jack being the named beneficiary.

    3. Jack's uncle has a will where everything will be left to Jack, with an option to use a testamentary trust. Jack's uncle passes and all assets go into the testamentary trust where Jack is personal trustee and named beneficiary.

    A few years has passed. Now Jack will be living overseas for a number of years while coming back to Oz for 2 months per year, while Jill stays in Oz.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes potentially to all
     
  3. money

    money Well-Known Member

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    Let's say there's only Jack in the original example and Jill doesn't exist. How do people usually fix the potential issues with all 3 examples if they are going to spend extended time overseas (but has the intention to come back to live in Oz down the track, possessions in Oz, family in Oz)?

    1. Pty Ltd Company - instead of Jack being sole director and shareholder, would Jack generally appoint a nominee director to be the 2nd director, such as an accountant or lawyer? Is this what overseas companies looking to establish an Australian subsidiary usually do?

    From: Managing foreign resident directors can be a bit... foreign
    “ordinarily resides” seems to be very vague and not defined according to PWC, so it seems there's no set time being overseas to "ordinarily resides"?

    2. Discretionary Trust (personal trustee) - would Jack generally appoint a nominee trustee to be the 2nd trustee, such as an accountant or lawyer?

    Under Australian domestic tax law, a trust is a resident for CGT purposes if:
    • the trustee is a resident of Australia; or
    • the central management and control of the trust is in Australia.
    In this case, as the trustee of the trust is a company incorporated in Australia, it (and therefore the trust) will continue to be a resident of Australia under Australian domestic laws.

    3. Testamentary Trust (personal trustee) - looks like Jack is safe and doesn't have to do anything as far as the will was executed before Dec 2020.

    From: CPN 004 v2: Foreign surcharges and discretionary trusts
     
    Last edited: 18th Apr, 2022
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Australia doesn't have nominee directors. A person is either a director or not.

    All Australian companies are required to have at least one director 'ordinarily resident' of Australia. You would need legal advice on what this amounts to.
    I wouldn't be a director of someone else's company - except for a large wage and full control.

    No such thing as nominee trustees either.

    How could you say that and then quote a practice from Revenue NSW. What about the commonwealth tax aspects?
     
  5. Trainee

    Trainee Well-Known Member

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    Nsw revenue only covers nsw land tax and stamp duty?

    Why personal trustee? What about jack’s own estate planning?
     
  6. Mike A

    Mike A Well-Known Member

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    i have a number of clients in this position. i would say most of the time a family member or relative is the resident Australian director.

    many clients see the family assets as a pool of resources. it seems to be mainly western thinking where you solely own your assets.
     
  7. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Lenders may have issues with family resident DIrectors needing to provide a guarantee. Lenders typically want ALL Directors to give a guarantee. Some will be confused by "alternate Directors" and if the Constitution allows may refer it to the banks legal officers. They may accept an alternate DIrector who is resident.

    Its possible Jack is still resident for tax purposes. But not "ordinarily resident" for Corporations Act and state trustee laws.