I've seen similar threads, but not one that seems to fit my situation. I've been contracting in IT for a number of years and was living overseas up until 2011 when I moved to New Zealand permanently. I now provide IT services to businesses both here in New Zealand and to Australian companies, on premise (NZ and Australia) and remotely (from home in NZ). I have a couple of questions regarding invoices and tax obligations based on financial recording dates.
For Australia, I operate as a "Sole Trader". I have a registered ABN and I'm currently registered for GST. My business address is my parent's permanent address in Brisbane.
For New Zealand, I operate as a "Sole Trader". I have an IRD number and I'm currently registered for GST. My business address is my current permanent address in New Zealand.
A question on raising invoices: If I am working for an Australian client, should I be invoicing as an Australian entity via my ABN and charge 10% GST? Or should I be invoicing as a New Zealand entity via my IRD number and charge 0% GST as a "Zero Rated Export"? What are the pros/cons? Either way, the Government still gets their GST component as any GST that is collected is returned to the ATO. If it's 10% then, the Australian company pays 10% (and reports this against their own Company GST return) which is collected by me and sent to the ATO. If it's 0%, then the Australian doesn't pay GST (and can't claim it either).
Australian companies shouldn't really care where I reside, as long as the invoices are valid and I provide Australian Bank Account details to make payment easier (no international money transfers).
This then leads into a question on Tax. If invoices are raised as an Australian entity:
A) Will tax need to be paid on the income received as an Australian "Sole Trader" even if the work is conducted remotely from New Zealand?
B) Or is this only used for GST reporting / collection? And all income is treated as New Zealand income?
If an Australian Tax Return is required, then a higher tax rate would be payable (compared with NZ), as an Australian "non-resident". This income would also need to be declared on my NZ Tax Return as "worldwide income", and the tax paid reported against the tax owing. Any over payment in Australia cannot be refunded.
Australian "Sole Trader" and a New Zealand "Sole Trader":
Example: $NZ10,000 earnt in NZ and $AU90,000 earnt in Australia and assume AUDNZD is 1.05
Australia: $AU90,000 as a non-resident would mean $AU29,385 tax payable
New Zealand: $NZ104,500 worldwide income would mean $NZ25,405 less $NZ30,854.25 - a tax overpayment of $NZ5,449.25. No tax refund.
However, declaring all New Zealand "Sole Trader" income:
Example: $NZ10,000 earnt in NZ and $AU90,000 earnt in Australia and assume AUDNZD is 1.05
New Zealand: $NZ104,500 worldwide income would mean $NZ25,405 tax payable.
Several problems / complications exist:
- Having proof that the correct overseas tax obligations have already been paid by the time the NZ Tax Return is due. Considering the NZ Tax Return is due by July 7th, I would need to submit the Australian Tax Return myself and pay any tax owing within 7 days of the June 30 EOFY, in order to get a receipt.
- Twice the effort for 2 tax returns each year
- The effort in calculating taxable "worldwide" income for a 30 March EOFY (NZ) compared with 30 June EOFY (Australia) for Bank accounts / investments / insurance.
- Recording any Australian expenses against New Zealand income.
From the above, it would make sense to issue Tax Invoices from New Zealand and "zero rate" them as an exported service. However, from July 1 2017, I must be GST registered if my turnover is above $AU75,000 and therefore require an ABN. Tax Invoices will need to generated and GST charged on any digital services. So it's all going to become even more complicated in a few months if it isn't already...
What have other people done?
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