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  • Working out your residency

    You need to know the residency status of your business entity to determine your Australian income tax obligations.

    Foreign resident entities are generally taxed in Australia on any income that has an Australian source. Australian resident entities are generally taxed on their worldwide income.

    There are different residency criteria for:

    Sole traders and ordinary partnerships

    If you operate your business as a sole trader or an ordinary partnership, your Australian income tax obligations are based on your individual residency.

    See also:

    Companies

    A company is a resident of Australia 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
      • its voting power controlled by shareholders who are residents of Australia.

    See also:

    • ATO Interpretative Decision ATO ID 2002/46 Residency status of a foreign company

    Corporate limited partnerships

    A corporate limited partnership will be considered a resident of Australia if either the partnership:

    • was formed in Australia
    • carries on business in Australia, or has its central management and control in Australia.

    It is usually not necessary to determine the residency status of ordinary partnerships (which do not have the benefit of limited liability). The individual partners are taxed on their share of the net partnership income according to their individual residency status.

    Trusts

    Generally, trusts are considered Australian residents for an income year if:

    • a trustee of the trust estate was a resident at any time during the income year, or
    • the central management and control of the trust estate was in Australia at any time during the income year.

    For capital gains tax (CGT) purposes, the resident conditions are the same, unless the trust is a unit trust. A unit trust is a resident trust for CGT purposes for an income year if it meets the unit trust residency requirement at any time during the year.

    For public trading trust purposes, the conditions for determining whether a unit trust is an Australian resident for an income year are the same as those for unit trusts for CGT purposes.

    The unit trust residency requirement has two parts. A condition in both the first and second parts must be met.

    Unit trust residency requirement

    One of these requirements was satisfied:

    Any property of the unit trust was situated in Australia.

    The trustee of the unit trust carried on a business in Australia.

    And also one of these:

    The central management and control of the unit trust was in Australia.

    One or more Australian residents held more than 50% of the beneficial interests in the income or property of the trust.

    Note: The concept of ‘property’ is broad and is not restricted to tangible property. It may include items such as trading stock, cash and software.

    Last modified: 15 May 2018QC 45541