A recurring conversation with Australian entrepreneurs concerns where the returns from their businesses will be taxed.

The businesses differ enormously. What often unites their founders is the expectation — or aspiration — that the business will generate substantial income and, ultimately, significant capital gains. Many question whether Australia is where they want those returns to be taxed.

One model increasingly encountered in Southeast Asia is to live in a jurisdiction such as Thailand while establishing and operating the business in Singapore.

There are sound commercial and personal reasons for that combination. Singapore offers a sophisticated legal, financial and corporate environment, ready access to regional markets and a corporate income tax rate of 17%, with numerous exemptions and concessions. Its highest resident individual income tax rate is 24%. Thailand may appeal for quite different reasons as the place where the founder and family actually want to live.

The model prompts three questions:

Where does the founder live? Where is the business conducted? And where does each relevant country say the resulting income and gains are taxable?

Establishing a company overseas may be straightforward. Moving an existing Australian business, its intellectual property and its founder raises separate tax questions. Asset transfers and related-party dealings need their own analysis, alongside the founder’s residence and departure-tax position.

Start with the founder, not the company

An Australian tax resident is generally exposed to Australian tax on worldwide income and gains. Establishing a Singapore company, opening foreign bank accounts or spending substantial periods overseas does not change that position.

For an Australian founder contemplating relocation, the threshold question is whether he or she will actually cease to be an Australian tax resident.

Physical departure is not enough. Australian tax residence depends on the founder’s circumstances and continuing connections with Australia. In particular, an Australian-domiciled individual remains resident unless the ATO is satisfied that the individual’s permanent place of abode is outside Australia.

That does not require the individual to occupy one particular permanent house or apartment overseas. A “place of abode” can extend to a town or country, and “permanent” is to be contrasted with temporary or transitory rather than meaning everlasting. The ATO’s current ruling emphasises the need to consider the person’s circumstances as a whole. That distinction can be critical in practice.

A founder may be entirely prepared to incorporate in Singapore, rent an apartment in Thailand and spend considerable time outside Australia, while retaining a home, family and substantial connections here. Those connections must be considered in context. Selling the Australian home or moving every family member is not a separate statutory requirement, but the founder’s actual living arrangements matter.

The question is not simply what the founder says he or she intends to do. The evidence of the founder’s actual life must support the claimed change of residence.

Leaving can itself have a tax cost

If the founder genuinely ceases Australian tax residence, departure can itself crystallise an Australian tax liability — in substance, a departure tax on unrealised gains.

Broadly, CGT event I1 requires a capital gain or loss to be calculated for relevant assets by reference to their market value when Australian residence ceases. There are specific exclusions and special rules, including for temporary residents. Australian real property generally remains within the Australian tax net without being subject to this departure event. The treatment of other Australian-connected assets needs to be checked separately.

For a founder whose shares in a start-up have already appreciated substantially, the resulting capital gain can be significant.

An individual can choose to disregard all capital gains and losses arising under CGT event I1 on departure. The choice is not made asset by asset, and it is not simply a deferral of payment of the departure tax. The affected assets are treated as taxable Australian property until the relevant statutory endpoint — generally disposal or becoming an Australian resident again. The consequence can be important: subject to the applicable rules and any treaty, the choice may expose to Australian tax not only the gain accrued before departure, but also further gains accruing afterwards.

For a founder expecting substantial growth, that creates an important planning consideration. The election may appear attractive because it avoids an immediate tax liability on departure. But for a rapidly-appreciating founder-owned business, it may preserve Australia’s taxing reach over precisely the future growth the founder hoped to move offshore.

There can be a further cost. If the founder later disposes of the assets while a foreign resident, the Australian gain is taxed under the rules applicable to foreign residents. The founder will no longer have the benefit of the Australian tax-free threshold, and entitlement to the CGT discount may also be restricted.

Nor can the election be considered solely from an Australian perspective. The founder’s new country of residence may also tax the eventual disposal. Whether that country gives the assets a market-value cost base when residence begins, and whether it gives full credit for Australian tax imposed on the later disposal, can materially affect the result. The interaction between the two systems — and any applicable tax treaty — therefore needs to be understood before the election is made.

When the founder leaves can therefore be almost as important as whether the founder leaves. Leaving before significant value has been created can produce a very different Australian tax outcome from building a valuable business in Australia and attempting to relocate afterwards.

What if Australian residence continues?

Continued Australian residence does not mean that every dollar earned by a foreign company is automatically taxable to the founder.

But Australia has rules intended to prevent Australian residents simply deferring Australian tax by accumulating particular kinds of income in foreign companies and trusts.

The controlled foreign company (CFC) rules can attribute income of a foreign company to Australian controllers without waiting for an actual distribution.

For a genuine operating business, however, the active income test is important. The test includes a requirement that the CFC’s tainted income ratio be less than 5%, together with other statutory requirements. Passing the test can materially limit the income exposed to attribution.

An Australian founder genuinely conducting an active operating business in Singapore is not in the same position as an Australian resident accumulating passive or other tainted income offshore. Particular related-party dealings can also produce tainted income; the statutory categories matter.

Foreign trusts raise different issues.

Australia’s transferor trust provisions provide an accruals regime under which income of certain non-resident trusts can be attributed to Australian resident transferors. The concepts of transferring property or services are broad, although the legislation contains important qualifications and exceptions.

Section 99B of Australia’s income tax law can operate at a different stage.

Section 99B can include in an Australian-resident beneficiary’s assessable income property of a trust paid to, or applied for the benefit of, that beneficiary. The provision contains important exclusions, but it can become particularly significant where foreign trusts contain income and gains accumulated over many years.

Recent ATO guidance illustrates the potential application of s 99B not merely to conventional cash distributions but also to gifts, loans and the use of trust property. Historical records identifying original corpus, accumulated income and gains can consequently become critical.

The Australian rules can therefore operate at different stages: some address foreign income while it is being accumulated; others become important when accumulated foreign wealth is eventually made available to an Australian resident.

Treaties and corporate structures may also matter

Where a founder lives in Thailand, owns a Singapore company and retains connections with Australia, the domestic laws of the three countries may only be the beginning.

Tax treaties can affect dual residence, permanent establishments and taxing rights over business profits, employment income, dividends, interest, royalties and capital gains.

The Australia–Thailand treaty, for example, contains tie-breaker rules for individuals resident in both countries under their respective domestic laws.

But a treaty should not simply be assumed to neutralise Australia’s CFC or other attribution regimes. The particular treaty and domestic provisions need to be considered together.

Similarly, incorporating a company in Singapore does not necessarily answer every corporate tax question. If the founder is actually directing and conducting its activities from another country, questions concerning corporate residence, source and permanent establishment can arise there.

Australia’s international tax system also contains relieving provisions. For example, qualifying foreign equity distributions received by an Australian corporate tax entity satisfying the relevant participation requirements can be non-assessable non-exempt income, and participation rules can also apply to gains and losses on qualifying foreign corporate interests.

These participation exemptions will often be more relevant to corporate holding structures than to an individual founder directly owning the foreign operating company. But they illustrate a broader point: Australia’s international rules contain both anti-deferral provisions and concessions intended to facilitate genuine international business investment.

Do not compare countries by one tax rate

Thailand illustrates another trap.

Thai individual income tax rates extend to 35%. An individual who stays in Thailand for 180 days or more in a calendar year is treated as resident for this purpose. Under the Revenue Department’s current interpretation, foreign-source income earned from 1 January 2024 by a person who is Thai-resident in the year in which that income is earned is subject to Thai income tax if and when it is remitted to Thailand, including where the remittance occurs in a later year.

These remittance rules concern foreign-source income. Work or business activities carried on in Thailand may generate Thai-source income even where payment is received abroad. Exemptions and treaty relief also require separate consideration.

More importantly, changing residence can introduce taxes with which an Australian founder may have little experience.

Thailand can impose inheritance tax on a recipient where the taxable inheritance from a deceased person exceeds THB100 million. The general rate on the taxable excess is 10%, reduced to 5% for ascendants and descendants; spouses are exempt. The property within the charge depends on the recipient’s status and the location and nature of the assets. The inheritance-tax residence rules should not be confused with the 180-day income-tax test.

Thailand’s gift-tax rules also contain annual exemptions, whose scope and amounts depend on the relationship between the parties and the nature of the gift.

Singapore provides a useful contrast: estate duty was abolished for deaths on or after 15 February 2008.

Changing tax residence does not eliminate tax obligations. It brings another tax system into the picture, while some obligations in the former country may continue.

The relevant comparison is therefore not merely the highest income-tax rate or whether a country taxes capital gains. It should extend across the founder’s economic life: taxation of business profits; personal income and distributions; foreign income and remittances; capital gains; CFC and other attribution regimes; gifts and succession; property and transaction taxes; and ultimately the treatment of leaving — or returning to — the jurisdiction.

Australia is not alone

Australia’s anti-deferral rules are not unusual internationally.

The United States has long attributed specified CFC income to US shareholders under Subpart F. It subsequently introduced GILTI, a regime modified and renamed net CFC tested income for taxable years beginning after 31 December 2025.

China provides an increasingly important Asian comparison. Its individual income tax legislation contains an adjustment power where a Chinese resident individual controls an entity in a distinctly low-tax jurisdiction and profits are retained without reasonable business justification.

On 24 July 2026, China’s Ministry of Finance and State Taxation Administration issued specific individual income tax rules for offshore trusts. For a Chinese resident individual, the rules can tax the transfer of property into an offshore trust by reference to market value, tax income and gains arising during the life of the trust, and impose tax consequences on termination. Separate administrative rules prescribe annual reporting and payment obligations.

The Chinese Ministry of Finance says the rules are intended to provide a clearer framework for taxing offshore trusts at their establishment, during their existence and on termination, consistently with China’s taxation of residents on worldwide income.

The new rules also address a change from Chinese resident to non-resident status. Acquiring foreign nationality or an overseas residence permit does not, by itself, settle the Chinese tax-residence question. For founders and families with continuing Chinese connections, that question needs to be considered alongside the Australian and destination-country rules.

Structure should follow substance

For a founder contemplating living in Thailand while operating a business in Singapore, the sensible sequence is not to establish the offshore structure first and ask about residence afterwards.

Before implementation, the founder and advisers should understand:

• where the founder and family will genuinely live, and what will happen to the Australian home and other connections;
• whether Australian tax residence will actually cease, and the CGT consequences if it does;
• who should own the foreign business and valuable intellectual property;
• where management and substantive business activities will actually occur;
• whether CFC, transferor trust or other attribution regimes can apply;
• how treaties and permanent-establishment rules affect the structure;
• how profits will reach the founder during the life of the business and how an eventual exit will be taxed; and
• what taxes apply in the destination country, including taxes on income and gains, gifts and succession.

Only then can headline tax rates be compared meaningfully.

The place of incorporation matters. But for an Australian founder, the more fundamental questions are whether the founder has really left Australia for tax purposes, what Australia taxes on the way out, and what tax system the founder enters on the other side.

Anthony Watson is a Principal of Watson Tax Lawyers. He advises on complex Australian tax, private wealth and cross-border structuring matters.

Selected sources

• Australian residence: ATO Taxation Ruling TR 2023/1.
• Departure CGT: Income Tax Assessment Act 1997, sections 104-160 and 104-165.
• CFC and transferor-trust rules: ATO Foreign income return form guide.
• Foreign trusts and section 99B: ATO Practical Compliance Guideline PCG 2024/3.
• Singapore: IRAS guidance on corporate rates, individual rates and estate duty.
• Thailand: Revenue Department guidance on foreign-source income, personal income tax, inheritance-tax liability and inheritance-tax legislation.
• Treaties: Australia–Thailand tax treaty and Treasury’s treaty and modification information.
• United States: IRS explanation of changes to GILTI and net CFC tested income.
• China: Individual Income Tax Law, article 8 and Ministry of Finance offshore-trust explanatory Q&A, 24 July 2026.