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Edited version of your written advice
Authorisation Number: 1012807109960
Ruling
Subject: Residency
Question and answer
Is the company an Australian resident for tax purposes?
No.
This ruling applies for the following periods:
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
The scheme commenced on:
1 July 2014
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.
The company is incorporated overseas.
The company has one shareholder who is also the only director.
The shareholder director is a permanent resident of Australia.
The company has a property portfolio which consists of one property.
The day to day management of the company is carried out by a property manager in the overseas country.
The day to day management consists of paying bills associated with the property, finding tenants, collecting rent, resolving tenant issues and arranging and paying for repairs and maintenance.
None of the day to day management is carried out by the director in Australia.
The director only makes high level decisions from time to time from Australia.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 6-1 and
Income Tax Assessment Act 1997 Section 995-1.
Reasons for decision
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.
The company is not incorporated in Australia, so it is necessary to consider if the company 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.
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.
The company has a property portfolio consisting of one property located overseas.
The company derives income from the renting of the property overseas.
All decisions relating to the rental property are made in the overseas country by a property manager.
None of the day to day decisions are made by the director of the company.
Location of central management and control
The sole director of the company is located in Australia and is a permanent resident of Australia.
The director makes the high level decisions from Australia.
Conclusion
The company is not a resident of Australia for taxation purposes as the company is not carrying on a business in Australia and they do not meet any of the three statutory tests.