Private ruling: Residency - Limited Liability Company
Published: December 2012

Ruling: Question and Answer | Is the Limited Liability Company 1, formed overseas, a resident of Australia for taxation purposes? | No.

Relevant facts and circumstances: Trust B is establishing a Limited Liability Company 1 (LLC 1), formed overseas. The LLC 1 will not be carrying on a business in Australia. Trust B will be the sole member of the LLC 1. The LLC 1 would have one director, individual Y. Company X has one director, individual Y. The shareholders of Company X are individual Y & individual Z. Individual Y & individual Z reside in Australia. The LLC 1 would not be elected to be treated as a corporation for the overseas country's income tax purposes. At all times during the income year LLC 1 would be an eligible entity that is disregarded as an entity separate from its owners for the overseas country's income tax purposes. The LLC 1 would appoint a Real Estate Agent located in the overseas country with the intention of property acquisition for investment purposes. Real Estate agent will: · Advise and make recommendations on potential property/s to be purchased. · Manage the acquisition processes of the property/s. · Manage required works, if required, to make the property suitable for rental. · Manage the property, including collecting rental income, paying expenses and dealing with all day to day requirements of the property. The real estate agent would have authority to carry out all necessary repairs up to an amount without seeking approval from the director. The director in Australia would make the following decisions, based on expert advice from the overseas country; · The final decision to acquire a property. · A possible decision in the future to sell the property. · Making a decision on repairs costing more than a certain amount. · Appointment of a real estate agent and managing agent.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 6(1)

Reasons for decision: Summary: The term' resident or resident of Australia' is defined in section 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). In respect of companies, the definition states in paragraph (b): a company which is incorporated in Australia, or which, not being incorporated in Australia, carries on business in Australia, and has either its central management and control in Australia, or its voting power controlled by shareholders who are residents of Australia. Therefore, as the Limited Liability Company 1 is being formed in an overseas country, is not carrying on a business in Australia; it will not be an Australian resident for taxation purposes.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | This advice applies for the following period: 1 July 2012 to 30 June 2016