Navigating Taxes as a Bali-Based Australian Digital Nomad

Being a digital nomad can be a dream come true for a whole lot of us. I mean, who wouldn’t want to escape to Bali and soak up that tropical sun while building your business? It’s unbeatable, a work-life balance worth pursuing. Who needs to worry about stuffy offices, business casual attire, and a strict 9 to 5 when you can kick your (bare) feet back poolside, type away on the ol’ laptop, and get just as much work done, if not more? 

However, just like a tropical storm rolling in on a tranquil & sunny day, taxes can be a sneaky surprise that just might ruin your perpetual holiday lifestyle.

If you’re a sole trader soaking up the Bali sun, working remotely, and invoicing an Australian company, you’re currently in a taxation grey area. You’re considered an overseas contractor for GST purposes and possibly a non-resident in Australia for income tax, which opens you up to potential taxation in both Indonesia and Australia… yikes. 

If this resonates with you, don’t fret. You’ve got two strategic routes to navigate this storm with ease.

The first option is going with the Australian Resident Entity route.

So, what is an Australian Resident Entity?

An Australian Resident Entity refers to an individual, company, or other legal entity that is considered a tax resident of Australia.

To go down this route, you’d need to set up shop back home with an Australian-based resident entity involving fellow Australian residents. This becomes the hub for your income, allowing you to claim related expenses. With careful strategising (this is where FRE.DM Wealth can really help), you could potentially pay as little as 5% (up to 30%) tax in Indonesia for individual contract fees, while the entity that you set up pays around 25% on residual profits. Your contract fees are deducted from these profits so you’re not double-taxed on individual amounts taken. 

The second option is going with the Indonesian PMA Route.

Firstly, what does PMA stand for? 

PMA stands for Penanaman Modal Asing, which translates to Foreign Investment.

What is a PMA?

An Indonesian PMA is a business entity in Indonesia that involves foreign investment, making it subject to specific regulations and requirements set by the Indonesian government.

So, you would create an Indonesian PMA, invoicing from this entity and enjoying the perks of paying as little as 0.5% tax on profits. While this route offers significant tax savings (as well as favourable visa options!), considering all financial affairs requires a thoughtful approach.

So what’s the key to these options?

• One, Decide where to be taxed.

• Two, Align with the requirements.

• Three, Strategically plan your income and residency.

• And four, Relax and enjoy your tropical work-life balance!

If you’re still unsure with which route works for your business, don’t hesitate to send us an email or DM on Instagram so we can set up a call to discuss how to build your wealth in a way that aligns with your unique business and lifestyle.