Contact UsAs an Entrepreneur of an internet company in Australia, I now want to move to the United States to marry my American fiance of two years. My company is generating about 5M dollars annually. I am considering selling my business to a business associate in Australia. My other option is moving the company entirely to the Unites States. What are the tax implications of such a move?
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Tax Professional Answers
Fred Rollo
You will have capital gains issues in Australia under either scenario. Under the sale scenario, your tax liability will crystallise immediately. Under the company move scenario, you may be able to defer the tax liability, but this means treating the company shares as a continuing Australian sited asset. The CGT clock would continue ticking.
There are some issues around transfer of domicile of a company and this would need to be achieved via a US State that had appropriate provisions in their corporate law.
If this is a business with a predominantly internationally sourced income, it may be opportune to consider a third country residence for the business. Expensive to set up properly, but may be beneficial in the medium term, especially if personal residence elsewhere maybe contemplated in the longer term. Estate planning opportunities may be a consideration also.
US tax issues would sensibly require a US attorney or CPA input. There are also cross-border intellectual property issues to be considered.
All-in-all, some very interesting alternatives to be considered!
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570 weeks ago
There are some issues around transfer of domicile of a company and this would need to be achieved via a US State that had appropriate provisions in their corporate law.
If this is a business with a predominantly internationally sourced income, it may be opportune to consider a third country residence for the business. Expensive to set up properly, but may be beneficial in the medium term, especially if personal residence elsewhere maybe contemplated in the longer term. Estate planning opportunities may be a consideration also.
US tax issues would sensibly require a US attorney or CPA input. There are also cross-border intellectual property issues to be considered.
All-in-all, some very interesting alternatives to be considered!
Dr. Daniel Erasmus
Being an internet based business, there are ways to structure the move potentially without incurring any tax liability.
For instance, if the Australian based co.clients migrate to a new US LLC set up, at their own instance, and the Australian business is wound down (subject to what an Aussie tax specialist has to say) I doubt there will be a tax liability.
Sometimes their are provisions in tax Acts that deem a disposal if there is some value-shifting arrangement, but if its the clients making that decision such a value-shifting arrangement may not be applicable. A new internet business is then created in the US.
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570 weeks ago
For instance, if the Australian based co.clients migrate to a new US LLC set up, at their own instance, and the Australian business is wound down (subject to what an Aussie tax specialist has to say) I doubt there will be a tax liability.
Sometimes their are provisions in tax Acts that deem a disposal if there is some value-shifting arrangement, but if its the clients making that decision such a value-shifting arrangement may not be applicable. A new internet business is then created in the US.
Steve Douglas
You have to be very careful with making a quick decision on this.
Under USA laws, if you eventually sell this business you will be taxed on the entire Capital Gains from the starting point, so this could be very expensive.
From an Australian point of view, if you keep the entity as is, it remains taxable even when overseas as business assets are taxable even for foriegners (which you become when you move permanently aborad).
One option is to do a genuine sale at market value to a new US incorporated entitiy. In Australia this does trigger Capital Gains Tax, including the 50% tax free gains since you have been operating more than 12 months.
The tax therefor may be small and manageable, which would mean that there is no further tax in Australia and only tax in USA above the contracted sale price.
This exemption would also apply if you sold to your friend, so worth considering an actual sale if you can get a good price for it.
A lot depends on your estimated value, cost base to have built the company up to date, access to cash to cover the potential tax cost, faith in the future growth and incoe potential of the business and intentions when abroad to build the business or pursue a new career.
Your actions depend largely on your intentions, so be clear and honest about that before deciding on the apropriate course of action.
Leave a Comment
570 weeks ago
Under USA laws, if you eventually sell this business you will be taxed on the entire Capital Gains from the starting point, so this could be very expensive.
From an Australian point of view, if you keep the entity as is, it remains taxable even when overseas as business assets are taxable even for foriegners (which you become when you move permanently aborad).
One option is to do a genuine sale at market value to a new US incorporated entitiy. In Australia this does trigger Capital Gains Tax, including the 50% tax free gains since you have been operating more than 12 months.
The tax therefor may be small and manageable, which would mean that there is no further tax in Australia and only tax in USA above the contracted sale price.
This exemption would also apply if you sold to your friend, so worth considering an actual sale if you can get a good price for it.
A lot depends on your estimated value, cost base to have built the company up to date, access to cash to cover the potential tax cost, faith in the future growth and incoe potential of the business and intentions when abroad to build the business or pursue a new career.
Your actions depend largely on your intentions, so be clear and honest about that before deciding on the apropriate course of action.