Private ruling: Residency
Date of advice: 15 March 2019
Published: May 2019
Ruling period: Year ended 30 June 2019 | Year ended 30 June 2020 | Year ended 30 June 2021 | Year ended 30 June 2022
Date scheme commenced: 1 July 2018

Ruling: Q1: Is Company A, a resident of Australia for tax purposes? | A1: No.

Relevant facts and circumstances: Company A is wholly owned by the Trust. The trustee of the Trust is Company B which is an Australian incorporated company. Two individuals are the sole directors of Company B. Company A was incorporated outside Australia. At the time of incorporation, the directors of Company A were all foreign residents and included the two individuals (former Australian residents) who were not tax residents at the time. The two individuals have been the sole directors of Company A since the foreign directors resigned. The two individuals returned to Australia to reside. Company A previously owned three overseas residential properties and sold two of them for a loss. Company A rents out the remaining property which is its sole source of income. Company A has not, and does not, derive income from Australian sources or conduct any business activities in Australia.

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

Reasons for decision: Summary: Subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) states that a company is a resident of Australia for taxation purposes if: ● it is incorporated in Australia, or ● although not incorporated in Australia, it 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. In this case, Company A was incorporated in a foreign country and its central management and control moved to Australia when the two individuals returned to Australia. However, regardless of Company A’s central management and control moving to Australia or the residency of its shareholders being in Australia, it can only be a resident of Australia if it carries on business in Australia. From the information provided, Company A has not, and does not, derive income from Australian sources or conduct any business activities in Australia. Therefore, Company A has not carried on business in Australia and accordingly is not a resident of Australia for tax purposes.