Determining Company Residence in Australia for Foreign Companies with Management in Australia

05/11/2018

ATO have recently published a tax ruling (TR 2018/5) setting out the Commissioner’s view on how to apply the central management and control test of company residency.

Under the central management and control test of residency, a company must carry on its business in Australia and have its central management and control in Australia to be Australian resident. The recent tax ruling states that if a company carries on business and has its central management and control in Australia, it will carry on business in Australia within the meaning of the central management and control test of residency. It is therefore not necessary for any part of the actual trading or investment operations of the business of the company to take place in Australia to be Australian resident, which is contrary to the interpretation previously applied by the ATO.

This will effect a number of companies who may have previously operated on the basis they remained UK-resident including:

  • Companies where the board meetings at which high-level decisions are made are held in Australia (does not matter where they are merely recorded and finalised)
  • Where the majority of those who control and oversee those who carry out the day-to-day business exercise that control from Australia
  • Where the majority of those who actually dictate and control the decisions of the directors, whether or not they have any legal power or authority to do so, do so from Australia

Please note that this list is not exhaustive.

This ruling applies from 15 March 2017, however ATO has granted companies a transitional period, up until 13 December 2018, to restructure before they start applying the new ruling to existing companies.

Click here to read the full ruling

Click here to read the published guidance on the ruling

For advice on whether you may be affected by this ruling and tax-efficient restructuring of your business please contact Joanne Lamberth or Liz Copeland.

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