Private ruling: Residency
Published: March 2014
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Is company A, a resident of Australia for taxation purposes? | Yes.

Relevant facts and circumstances: Company A is incorporated outside Australia. Company A is the sole shareholder of an Australian incorporated company, Company B. Company A's operations solely relate to the management of Company B and other group entities/subsidiaries of Company B. Company A's income is derived solely from the investment decisions it makes. Company A currently has multiple directors, the majority of the directors are Australian residents for tax and migration purposes, and the minority is a/are foreign resident(s). Currently, all directors' meetings of Company A are held in Australia and will continue to be held in Australia. The foreign director(s) join the meetings via video conferencing facilities.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 6-1 and | Income Tax Assessment Act 1997 Section 995-1.

Reasons for decision: Summary: There are three tests to determine residency for the purposes of income tax law: refer to subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). A company will be a resident if: • it is incorporated in Australia, or • if the company is not incorporated in Australia, but it is either: • carrying on a business in Australia and its central management and control is in Australia, or • carrying on a business in Australia and its voting power is controlled by shareholders who are Australian residents. A company will only need to satisfy one of the tests to be a resident of Australia for tax purposes. Company A is not incorporated in Australia, so it is necessary to consider if Company A is carrying on a business in Australia with further consideration to whether that business' central control and management is in Australia; or whether the voting power is controlled by shareholders who are Australian residents. | Detailed Reasoning - Carries on a business in Australia: The question of where business is carried on is one of fact requires consideration of where the activities of the company are carried on and is dependent on the facts and circumstances of a case. A company whose income earning outcomes are largely dependent on the investment decision made in respect of its assets, carries on its business where these decisions are made. Company A is a holding company and sole shareholder of Company B. Company A's sole asset is Company B which is an Australian incorporated company. You indicate that Company A currently holds all directors' meetings in Australia. The foreign director(s) joins the board meetings via video conferencing facilities. The majority of the directors are resident directors. As the income earning outcomes of Company A are decided by a majority board of directors in Australia, Company A is therefore carrying on a business in Australia. | Detailed Reasoning - Location of central management and control: Currently the majority of board members of Company A are based in Australia, and the foreign director(s) joins the board meetings via video conferencing facilities. There is a focus on where the participants contributing to high level decisions are based when determining the location of central management and control. The fact that a majority of board members are located in Australia when participating in the meetings satisfies that central management and control is in Australia (paragraph 50 Taxation Ruling TR 2004/15). | Detailed Reasoning - Conclusion: As Company A is located in Australia and it is carrying on business in Australia, it is a resident of Australia under the second statutory test.