Edited version of private ruling

Authorisation Number: 1011734495230

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Ruling

Subject: Requirement for the company to lodge an income tax return in current and future years in which it remains dormant

Question 1

Is the company required to lodge an income tax return for the 2010 income year?

Answer:

The company will not be required to lodge an income tax return for the 2010 income year provided the Commissioner does not exercise his power to demand lodgment of the return.

Question 2

Is the company required to lodge an income tax return in future years in which it remains dormant?

Answer:

Dependent on the circumstances for the given year, the company may not be required to lodge an income tax return each year where there are no activities carried on and no income derived.

This ruling applies for the following periods:

1 July 2009 to 30 June 2011

The scheme commences on:

1 July 2009

Relevant facts and circumstances

The company has never lodged an income tax return.

The company has been dormant since incorporation including the 2010 income year.

The company has no assets, liabilities, income or expenses other than its annual ASIC filing fee.

The company has not traded or entered into any transaction other than making arrangements to pay their annual ASIC filing fee.

Typically the ASIC fee is paid from the personal funds of a director or shareholder.

In some cases the annual ASIC fee has been treated as an expense and the payment of that fee by a third party has been treated as a liability of the company, which has later been forgiven.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 161.

Reasons for decision

Question 1

Summary

The company will not be required to lodge an income tax return for the 2010 income year provided the Commissioner does not exercise his power to demand lodgment of the return.

Detailed reasoning

Subsection 161(1) of the Income Tax Assessment Act 1936 (ITAA 1936) states:

Every person must, if required by the Commissioner by notice published in the Gazette, give to the Commissioner a return for a year of income within the period specified in the notice.

As required by section 161 of the ITAA 1936, the Lodgment Legislative Instrument (which replaces the Gazette notice) sets out each year the persons, or class of persons, who are required to lodge an income tax return for the financial year.

The 2010 and earlier Lodgment Legislative Instruments define a full self assessment taxpayer to include a company.

Table F of the Legislative Instrument 2010, registered for the purposes of subsection 161(1) of the ITAA 1936, provides that the following class of person is required to lodge a return:

Every person being a full self-assessment taxpayer (excluding trustees of superannuation funds, approved deposit funds and pooled superannuation trusts) not covered by Table N or Table O that during the year of income:

(1) is an Australian resident, and derived income (including capital gains) from sources in Australia or sources outside Australia; or

(2) is a non-resident of Australia, and derived income (including capital gains) that is taxable in Australia other than:

· dividend, interest or royalty income subject to withholding payments covered by Subdivision 12-F in Schedule 1 to the Taxation Administration Act 1953, and

· fund payments from managed investment trusts subject to withholding because of the amendments to Subdivision 12-H in Schedule 1 to the Taxation Administration Act 1953 made by Tax Laws Amendment (Election Commitments No 1) Act 2008 (relating to fund payments from managed investment trusts to non-residents).

There are other factors as outlined in the Legislative Instrument, in addition to the above, which provide circumstances where lodgment is required. As you have advised that the company is dormant and does not undertake any activities nor derive any income then none of the other requirements to lodge are met.

Although the Legislative Instrument states who is required to lodge a return and does allow for exemptions, it also specifically states, as follows, that the instrument does not remove the Commissioner's power to require lodgment of a return:

NOTICE OF REQUIREMENT TO LODGE A RETURN OR INFORMATION

Nothing in this Instrument prevents me or an authorised officer of the Australian Taxation Office from issuing a notice, pursuant to section 162 or 163 of the Income Tax Assessment Act 1936, requiring a person to give me, in the approved form, a return, or further returns, or any information, statement or document about the person's financial affairs for any year of income.

Therefore even where no assessable income is derived you may still be required to lodge an income tax return where the Commissioner directs you to do so.

Where none of the conditions required to lodge an income tax return are met and the Commissioner has not specifically requested you to lodge an income tax return then you should still advise the Commissioner that no income tax return will be lodged.

Question 2

Summary

Dependent on the circumstances for the given year, the company may not be required to lodge an income tax return each year where there are no activities carried on and no income derived.

Detailed reasoning

Subsection 161(1) of the Income Tax Assessment Act 1936 (ITAA 1936) states:

Every person must, if required by the Commissioner by notice published in the Gazette, give to the Commissioner a return for a year of income within the period specified in the notice.

As required by section 161 of the ITAA 1936, the Lodgment Legislative Instrument (which replaces the Gazette notice) sets out each year the persons, or class of persons, who are required to lodge an income tax return for the financial year.

For future income years you should refer to the relevant Legislative Instrument to determine whether your circumstances are defined in any of the listed Tables which outline who is required to lodge an income tax return.

The 2010 and earlier Lodgment Legislative Instruments define a full self assessment taxpayer to include a company.

Table F of the Legislative Instrument 2010, registered for the purposes of subsection 161(1) of the ITAA 1936, provides that the following class of person is required to lodge a return:

Every person being a full self-assessment taxpayer (excluding trustees of superannuation funds, approved deposit funds and pooled superannuation trusts) not covered by Table N or Table O that during the year of income:

(1) is an Australian resident, and derived income (including capital gains) from sources in Australia or sources outside Australia; or

(2) is a non-resident of Australia, and derived income (including capital gains) that is taxable in Australia other than:

· dividend, interest or royalty income subject to withholding payments covered by Subdivision 12-F in Schedule 1 to the Taxation Administration Act 1953, and

· fund payments from managed investment trusts subject to withholding because of the amendments to Subdivision 12-H in Schedule 1 to the Taxation Administration Act 1953 made by Tax Laws Amendment (Election Commitments No 1) Act 2008 (relating to fund payments from managed investment trusts to non-residents).

There are other factors as outlined in the Legislative Instrument, in addition to the above, which provide circumstances where lodgment is required. Examples as contained in table A of the Legislative Instruments where an income tax return may be required to be lodged even though no income has been derived are:

· incurred a tax loss or made a net capital loss or is entitled to deduct a tax loss or apply a net capital loss of an earlier year of income, or being a company or trust estate has undeducted tax losses or unapplied net capital losses of any earlier year of income where those losses exceed $1,000 or, being a company, transfers a tax loss or net capital loss to another group company; or

· carried on a business; or

· was entitled to income as a beneficiary of a trust estate that has operated a 'primary production business' (as defined in section 995-1 of the Income Tax Assessment Act 1997) in Australia; or

· had an individual interest in the net income or partnership loss of a partnership which operated a primary production business (as defined) in Australia.

Although the Legislative Instrument states who is required to lodge a return and does allow for exemptions, it also specifically states, as follows, that the instrument does not remove the Commissioner's power to require lodgment of a return;

NOTICE OF REQUIREMENT TO LODGE A RETURN OR INFORMATION

Nothing in this Instrument prevents me or an authorised officer of the Australian Taxation Office from issuing a notice, pursuant to section 162 or 163 of the Income Tax Assessment Act 1936, requiring a person to give me, in the approved form, a return, or further returns, or any information, statement or document about the person's financial affairs for any year of income.

Therefore even where no assessable income is derived you may still be required to lodge an income tax return where the Commissioner directs you to do so.

Where none of the conditions required to lodge an income tax return are met and the Commissioner has not specifically requested you to lodge an income tax return then you should still advise the Commissioner that no income tax return will be lodged.

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