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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of private ruling

Authorisation Number: 1011615299394

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Ruling

Subject: Residency status

Question 1

Is Company A a resident of Australia within the meaning of subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Answer

Yes.

Question 2

Will Company A be subject to Australian tax on its assessable income including ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year pursuant to section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer


Yes.

This ruling applies for the following periods:

Other/Substituted Accounting Period 1 January 2010 to 31 December 2010

Other/Substituted Accounting Period 1 January 2011 to 31 December 2011

Other/Substituted Accounting Period 1 January 2012 to 31 December 2012

Other/Substituted Accounting Period 1 January 2013 to 31 December 2013

Other/Substituted Accounting Period 1 January 2014 to 31 December 2014

Other/Substituted Accounting Period 1 January 2015 to 31 December 2015

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

Company A was incorporated in Australia.

It is a company that is directly owned by Company B (a non-resident member of the Company Group), which is ultimately owned by Company C, an overseas resident company.

Company A is not a resident of any country, with which Australia has entered into a Double Tax Agreement (DTA).

Assumption

Company A will not become a resident of any country, with which Australia has entered into a DTA.

Relevant legislative provisions

Income Tax Assessment Act 1936 6(1),

Income Tax Assessment Act 1997 995-1 and

Income Tax Assessment Act 1997 6-5(2).

Does Part IVA apply to this ruling?

Part IVA of the ITAA 1936 is a general anti-avoidance rule that can apply in certain circumstances if you or another taxpayer obtains a tax benefit in connection with an arrangement and it can be concluded that the arrangement, or any part of it, was entered into or carried out by any person for the dominant purpose of enabling a tax benefit to be obtained. If Part IVA applies the tax benefit can be cancelled, for example, by disallowing a deduction that was otherwise allowable.

We have not fully considered the application of Part IVA of the ITAA 1936 to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part.

If you want us to rule on whether Part IVA of the ITAA 1936 applies we will first need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply.

For more information on Part IVA, go to our website www.ato.gov.au and enter 'part iva general' in the search box on the top right of the page, then select: Part IVA: the general anti-avoidance rule for income tax.

Reasons for decision

Summary

The taxation law requires that a corporation that is an Australian resident shall be subject to Australian tax. Accordingly, as Company A is incorporated in Australia it is an Australian resident and shall be subject to Australian tax on ordinary income derived directly or indirectly from all sources whether in or out of Australia.

Detailed reasoning

The statutory definition of Australian resident in section 995-1 of the ITAA 1997 points to the definition of resident or resident of Australia in subsection 6(1) of the ITAA 1936, this provision states that a company is a resident of Australia if:

The subsection provides that if a company is incorporated in Australia it will, regardless of other aspects, be treated as a resident of Australia for Australian taxation law purposes.

Under subsection 6-5(2) of the ITAA 1997, an Australian resident is subject to Australian tax on the ordinary income it derives directly or indirectly from all sources, whether in or out of Australia during the income year.

As Company A was incorporated in Australia, notwithstanding that Company A is owned by a non-resident and carries on business outside Australia, it will still be treated as a resident of Australia within subsection 6(1) of the ITAA 1936.

As Company A satisfies the definition of a resident of Australia as outlined above it will therefore be subject to the provisions in subsection 6-5(2) of the ITAA 1997, namely that it will be subject to Australian tax on ordinary income derived directly or indirectly from all sources whether in or out of Australia.

Company A is not a resident of any country with which Australia has entered into a DTA. On this basis, Company A is not a dual resident for Australian taxation purposes.

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