Edited version of your written advice

Authorisation Number: 1051417416366

Date of advice: 17 September 2018

Ruling

Subject: Corporate Residency

Question 1

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

Answer

No.

Question 2

Is Company B resident of Australia under subsection 6(1) of the ITAA 1936?

Answer

No.

Question 3

Is Company C resident of Australia under subsection 6(1) of the ITAA 1936?

Answer

No.

This ruling applies for the following periods

Year ended 30 June 20XX

The scheme commences on

1 July 20XX

Relevant facts and circumstances

The Group

● The Group engages in financial market trading.

● The Group is headquartered in Country A (which is not Australia).

● The Group operates out of offices in multiple countries.

The Board of Directors (the Board) of Company A, Company B and Company C (the three entities)

● The Board consist of the same X directors for each entity. Each director is entitled to one vote in respect of any resolution and the majority vote will hold sway.

● Two of the directors of the Board are Australian tax residents and live in Australia and the other three directors are tax residents of Country A and live in Country A.

● All meetings of the Board are held in Country A. The Australian resident Directors travel to Country A to attend regular board meetings.

● The Board meeting minutes of the Group record where the high level decisions are made and who makes them.

● Both the Board and the management team of the Group (the Management Team) are responsible for taking decisions that influence the three entities’ operations. The Board has separate duties from the Management Team in that the Board are not involved in the day-to-day operational decisions of the three entities whereas the Management Team makes decisions in relation to the day-to-day operational matters of the three entities.

● The decisions of the Board are made on a periodic basis rather than regularly.

● The Board oversee the activities of the Management Team and ensures compliance.

● The Board holds the power to appoint and revoke company officers under the respective constitutional documents of Company A, Company B and Company C.

● The Board is responsible for:

● All share related decisions including changes to the shareholders agreements

● Capital decisions including retention or distribution of profits via dividends, and

● Oversight of the Management Team including the appointment of key executives

● The investment strategy for the Group is determined by the Board in conjunction with the Management Team.

Company A

● Company A is a company limited by shares that is not registered in Australia. Company A is the ultimate parent company of the Group.

● Company A is a passive investment vehicle, holding the shares of other members of the Group. Company A does not conduct any direct business or trading operations in Australia. Company A does not have any employees in Australia.

● The Memorandum of Association & Articles of Association of Company A are the constitutional documents for Company A. Company A is run in accordance with these documents. These documents, in their entirety, form part of the scheme to which this Ruling relates.

● The two largest shareholders are both Australian tax residents and currently own more than 50% of the shares in Company A.

● Shareholders’ meetings are held outside of Australia.

● The share register of Company A is kept outside of Australia.

● The books and records of Company A are kept outside of Australia.

● The registered office of Company A is outside of Australia.

Company B

● Company B is a company limited by shares that is registered and incorporated in Country A.

● The Memorandum of Association & Articles of Association of Company B are the constitutional documents for Company B. Company B is run in accordance with these documents. These documents, in their entirety, form part of the scheme to which this Ruling relates.

● Company A owns 100% of the equity interests in Company B.

● Company B is a registered trader in various international trading markets.

● Income derived from Australian trading activities of the Group is derived through the Australian permanent establishment (PE) of Company B.

● Company B has entered into a Service Level Agreement with Company C and another Australian entity owned by the group (Company D). Company C employs staff for the group in Country A. In Australia, Company D employs staff for the group. Company B pays both entities cost-plus service fees and performance fees under the respective Service Level Agreements with each entity. The services provided by Company C and Company D to Company B, including its Australian branch, include the employment of staff, payment of office rentals, administrative functions, management services, trading tools and software development, IT operations support, risk management, finance and accounting, compliance and human resources management.

● Shareholders’ meetings are held outside of Australia.

● The share register of Company B is kept outside of Australia.

● The books of Company B and records are kept outside of Australia.

● The registered office of Company B is located outside of Australia.

Company C

● Company C is a company limited by shares that is registered and incorporated in Country A.

● The Memorandum of Association & Articles of Association of Company C are the constitutional documents for Company C. Company C is run in accordance with these documents. These documents, in their entirety, form part of the scheme to which this Ruling relates.

● Company A owns 100% of the shares in Company C.

● Company C does not conduct any business in Australia. Company C does not have any employees in Australia.

● Company C is a registered trader in various international trading markets.

● All shareholders’ meetings are held outside of Australia.

● The share register of Company C is kept outside of Australia.

● The books of Company C and records are kept outside of Australia.

● The registered office of Company C located outside of Australia.

Management Team

● The Management Team members comprise of employees based in both Country A and Australia. Each team member is responsible for a separate area and they possess the requisite skills and experience to take strategic decisions in their designated fields.

● The Management Team is responsible for a wide variety of matters including trading, operational matters, information technology, commercial, accounting and finance, human resources and quantitative analysis.

Business Activities

● The percentage of Australian turnover (through the Australian PE of Company B) in proportion to the Group turnover for the 2015, 2016, 2017 and 2018 financial years was between 10-30% each year.

● There are documented frameworks for risk management which gives limits to all trading strategies the Group undertakes. The final decision on these trading limits is made by the Head of Trading however input is given by trading team leads and the Risk Manager. The decision to approve trading of new strategies or lessening of trading risk parameters ultimately resides with the Head of Trading however; the Board may be involved with the initial decision to expand trading into a new market or asset class where a capital allocation decision is required.

Relevant Legislative Provisions

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

Question 1

Is Company A resident of Australia under subsection 6(1) of the ITAA 1936?

Detailed Reasoning

The term ‘resident’ in relation to a company is defined within subsection 6(1) of the ITAA 1936, and is defined at paragraph (b) of that term as:

(b) a company which is incorporated in Australia, or which, not being incorporated in Australia, 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.

The definition sets the criteria necessary to establish residency of a company. The first element of the definition states that a company which is incorporated in Australia, is a resident of Australia (the incorporation test). For a company incorporated in Australia, this is where the examination ends to determine if the company is a resident under the definition.

If a company is not incorporated in Australia, a company will be a resident under ‘the central management and control (CM&C) test’ of company residency in paragraph (b) if it carries on business in Australia and has its CM&C in Australia.

Alternatively, a company which is not incorporated in Australia will be a resident under ‘the voting power test’ if it carries on business in Australia and has its voting power controlled by shareholders who are residents of Australia.

Incorporation Test

Company A is not incorporated in Australia and is not a resident company under the incorporation test within subsection 6(1) of the ITAA 1936.

CM&C Test

Whilst this reasoning will focus on Company A, based on the facts and circumstances of this Ruling, it is considered that CM&C for each of the three entities will be in the same location.

Taxation Ruling TR 2018/5 Income tax: central management and control test of residency (TR 2018/5) sets out the Commissioner’s view on how to apply the CM&C test of company residency following Bywater Investments Limited & Ors v. Commissioner of Taxation; Hua Wang Bank Berhad v. Commissioner of Taxation [2016] HCA 45; 2016 ATC 20-589 (Bywater).

As outlined at paragraph 10 of TR 2018/5, CM&C refers to the control and direction of a company’s operations. Paragraph 11 of TR 2018/5 states that the key element in the control and direction of a company’s operations is the making of high-level decisions that set the company’s general policies, and determine the direction of its operations and the type of transactions it will enter.

What activities constitute high-level decision-making?

Paragraph 16 of TR 2018/5 provides examples of what acts involve exercising CM&C:

16. Exercising central management and control of a company can involve:

● setting investment and operational policy including:

● setting the policy on disposal of trading stock, and/or the use and development of capital assets

● deciding to buy and sell significant assets of the company

● appointing company officers and agents and granting them power to carry on the company’s business (and the revocation of such appointments and powers)

● overseeing and controlling those appointed to carry out the day-to-day business of the company, and

● matters of finance, including determining how profits are used and the declaration of dividends.

In applying the activities stated in paragraph 16 of TR 2018/5 to Company A and the Group, the following can assist in determining who exercises the high-level decision-making that can amount to CM&C.

Setting investment and operational policy including setting the policy on disposal of trading stock, and/or the use and development of capital assets; and deciding to buy and sell significant assets of the company

There are documented frameworks for risk management which gives limits to all trading strategies the Group undertakes. The final decision on these trading limits is made by the Head of Trading however input is given by trading team leads and the Risk Manager. The decision to approve trading of new strategies or lessening of trading risk parameters ultimately resides with the Head of Trading however; the Board may be involved with the initial decision to expand trading into a new market or asset class where a capital allocation decision is required.

Appointing company officers and agents and granting them power to carry on the company’s business (and the revocation of such appointments and powers)

The Board of the three entities have the power to appoint and revoke company officers under their respective constitutional documents.

Overseeing and controlling those appointed to carry out the day-to-day business of the company

The Management Team of the Group carry out the day-to-day business of the company. The Board of the three entities are responsible for oversight of the Management Team including the appointment of key executives to the Management Team.

Matters of finance including determining how profits are used and the declaration of dividends

The Board of the three entities are responsible for all share related decisions including changes to the shareholders agreement. They are also the decision-makers for capital decisions including retention or distribution of profits via dividends.

Paragraph 17 of TR 2018/5 outlines that matters of company administration are not acts of CM&C. These administrative acts include keeping a company’s share register, keeping a company’s accounts and the minimum acts necessary to maintain a company’s registration. For each of the three entities, none of these activities are carried out in Australia.

Who exercises CM&C?

Paragraph 19 of TR 2018/5 states that identifying who exercises CM&C is a question of fact. Paragraphs 20-22 of TR 2018/5 provide that:

20. Normally, where a company is run by its directors in accordance with its constitution and the company law rules applicable to that company, which give its directors the power to manage the company, the company’s directors will control and direct its operations. It follows that ordinarily it is a company’s directors who exercise its central management and control.

21. However, the actions of a company’s directors, or others with the legal power and authority to control and manage the company, are not the end of the enquiry as to who exercises central management and control. There is no presumption that the directors of a company will always exercise its central management and control.

22. When determining who exercises a company’s central management and control, all the relevant facts and circumstances must be considered. Facts and circumstances to be considered in determining who exercises a company’s central management and control include the role of anyone who assumes the role of the directors’ role in managing and controlling the company’s affairs or has a role in the decision-making processes or governance of the company.

In applying the circumstances stated in paragraphs 19-22 of TR 2018/5 to Company A and the Group, the following can assist in determining who exercises the CM&C.

As the Group is run by its Board in accordance with each of the three entities’ Memorandum of Association & Articles of Association, the Board do control and direct the operations. In following paragraph 20 of TR 2018/5, this would ordinarily amount to the Board exercising CM&C however there is no presumption of this and all facts and circumstances must be considered including the role of anyone who assumes the role of the directors’ role in managing and controlling the company’s affairs or has a role or input in the decision-making processes or governance of the company.

It is considered that, while the Management Team has a role or input in some decision-making processes, the ultimate decision-making related to the high-level decisions required for Company A and the Group is conducted through by the Board. The Management Team is responsible for a wide variety of matters including trading, operational matters, information technology, commercial, accounting and finance, human resources and quantitative analysis. This is considered to be a necessary element of the day-to-day business of the company but not determinative of the authority to control and manage the company that would result in an exercise of CM&C.

Where is the CM&C carried out?

In determining where CM&C of a company is exercised, paragraph 30 of TR 2018/5 provides:

30. A company will be controlled and directed where those making its high-level decisions do so as a matter of fact and substance. It is not where they are merely recorded and formalised, or where the company’s constitution, bylaws or articles of association require it be controlled and directed, if in reality it occurs elsewhere. This will not necessarily be the place where those who control and direct a company live.

Paragraph 34 of TR 2018/5 states that where a company’s CM&C is exercised is not determined by where the directors, or other persons, who control and manage it, are resident or live. It states that what matters is where they actually perform the activities to control and direct the company.

Relevant considerations in determining where CM&C is exercised are provided in paragraphs 35-38 of TR 2018/5:

35. No single factor alone will necessarily determine where central management and control of a company is exercised. The relevance and weight to be given to each will depend on the facts and circumstances of the case and surrounding circumstances.

36. The matters most likely to influence a court’s decision, as to where those who control and direct the operations of a company do so from, are:

● where those who exercise central management control do so, rather than where they live

● where the governing body of the company meets

● where the company declares and pays dividends

● the nature of the business and whether it dictates where control and management decisions are made in practice

● minutes or other documents recording where high-level decisions are made.

37. Other matters, of lesser weight, the courts have considered in analysing where a company’s central management and control is exercised include:

● where those who control and direct the company’s operations live

● where the company’s books are kept

● where its registered office is located

● where the company’s register of shareholders is kept

● where the shareholder’s meetings are held

● where its shareholders reside.

38. These factors are used to help identify where a company’s directors, or others, actually make its high-level decisions and in doing so where they actually manage and control the company.

39.

Following paragraph 34 of TR 2018/5, it cannot be said prima facie that due to two of the five directors being Australian tax residents that Australia is the place where CM&C exists.

As no single factor alone will necessarily determine where CM&C of a company is exercised, the relevance and weight to be given to each factor will depend on the facts and circumstances of the case and surrounding circumstances. The following is a consideration of the above factors considered in paragraph 36 of TR 2018/5 which are the matters most likely to influence a court’s decision as to where those who control and direct the operations of a company do so from.

In considering alternatives to where the five members of the Board live, the meetings of the Board are held in Country A and this is where the decisions of Company A and the Group regarding the declaration and payment of dividends occurs.

The nature of the business and whether it dictates where control and management decisions are made in practice is also relevant. As the Group is involved in trading in financial markets globally, the day-to-day trading activities would not require the input of the Board and would be considered to be dealt with by the Management Team and employees of the Group. When decisions need to be made outside of the ordinary run of business, the Board makes these decisions.

It is also necessary to consider the other matters, of lesser weight that the courts have considered in analysing where a company’s CM&C is exercised, as set out in paragraph 37 of TR 2018/5.

Two of the members of the Board are tax residents and live in Australia and three of the members of the Board are tax residents and live in Country A. On the balance, as each member of the Board has an equal vote, this factor does not, of itself, support a conclusion that the CM&C of Company A is in Australia.

Further, the three entities’ books are not kept in Australia. The registered office of the three entities’ is not located in Australia. The share register of the three entities are not kept in Australia. The shareholders meetings are not held in Australia. The shareholders of Company A reside in Australia, Country A and elsewhere. None of these factors are indicative that CM&C is in Australia.

The Board meeting minutes of the Group record where high level decisions are made and who makes them and these minutes indicate these decisions are made in Country A by the Board. Based on this and the further factors discussed above, it is considered that the CM&C of Company A is not in Australia.

As CM&C is not in Australia for Company A, it is not necessary to consider whether it carries on business in Australia in the context of the CM&C test.

Therefore, Company A is not a resident company under the CM&C test within subsection 6(1) of the ITAA 1936.

Voting Power Test

As noted above, the definition of resident of Australia is defined in subsection 6(1) of the ITAA 1936 at paragraph (b) of that term as:

(b) a company which is incorporated in Australia, or which, not being incorporated in Australia, 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.

From this definition, to satisfy the voting power test when a company is not incorporated in Australia, two circumstances both need to be met. These are that the company ‘carries on business in Australia’ and has its ‘voting power controlled by shareholders who are residents of Australia.’

Carries on business in Australia

The phrase ‘carries on business’ is not defined in Australia’s income tax legislation. Whether business is being carried on is a matter of fact. When the company in question does in fact carry on business, the question to be considered in the context of the voting power test is whether the company carries on that business in Australia.

In FCT v Murray (1998) 193 CLR 605; 39 ATR 129 it was stated that ‘[a] business is not a thing or things. It is a course of conduct carried on for the purposes of profit and involves notions of continuity and repetition of actions.’ It is considered that the phrase ‘carries on business’ in the definition of ‘resident’ in subsection 6(1) of the ITAA 1936 should be read in wide context to encompass all activities carried on by a company whether or not those activities are of a passive nature or would be described as ‘business’ within the common meaning of that word.

Draft Taxation Ruling TR 2017/D7 Income tax: when does a company carry on a business within the meaning of section 23AA of the Income Tax Rates Act 1986? (TR 2017/D7) sets out the Commissioner's preliminary, but considered, views on when a company carries on a business within the meaning of section 23AA of the Income Tax Rates Act 1986. Paragraph 30 of TR 2017/D7 provides guidance on the Commissioner’s view on the wide concept of ‘business’:

30. A company has been held to carry on business where its ongoing activities are relatively limited and its key activities consist of:

● letting the company's premises for rent on an ongoing basis

● leasing its plant to its subsidiaries for no fee

● providing secretarial, budgeting and financial services to its subsidiaries that carry on active businesses, and

● holding shares in subsidiary companies which are engaged in trading.

The Commissioner withdrew Taxation Ruling TR 2004/15: Income tax: residence of companies not incorporated in Australia - carrying on business in Australia and central management and control (TR 2004/15) following the decision of the High Court of Australia in Bywater Investments Limited & Ors v. Commissioner of Taxation; Hua Wang Bank Berhad v. Commissioner of Taxation [2016] HCA 45; 2016 ATC 20-589 (Bywater). It is noted that while TR 2004/15 has been withdrawn, the ruling it was replaced by, TR 2018/5, does not outline the Commissioner’s view of when an entity carries on business in Australia in the context of the voting power test.

In relation to the Commissioner’s guidance on this point, TR 2004/15 stated:

Carries on business in Australia

9. The question of where business is carried on is one of fact. It requires a consideration of where the activities of the company are carried on and is dependent on the facts and circumstances of a case. However, the Commissioner's approach to this factual determination is to draw a distinction between a company with operational activities (for example trading, service provision, manufacturing or mining activities) and a company which is more passive in its dealings. It is appreciated that there will be some overlap in any particular situation.

10. For the purposes of the second statutory test, a company that has major operational activities relative to the whole of its business carries on business wherever those activities take place and not necessarily where its CM&C is likely to be located. Operational activities include major trading, service provision, manufacturing or mining activities. For example, the place of business of a large industrial concern is wherever its offices, factories or mines are situated.

11. On the other hand, a company whose income earning outcomes are largely dependent on the investment decisions made in respect of its assets, carries on its business where these decisions are made. This is often where its CM&C is located.

12. It is considered that for the purposes of paragraph 6(1)(b), the concept of carrying on a business may be wider than its ordinary meaning and extends to undertakings of a business or a commercial character. For example, for the purposes of the second statutory test, a company may be carrying on business even if its only activity is the management of its investment assets.

TR 2004/15 also stated that:

24. It is necessary to examine all the relevant facts and circumstances of a company's activities to determine whether it carries on business in Australia.

25. A practical approach which provides a starting point for determining the location of the business is to draw a distinction between a company with operational activities (for example, major trading, service provision, manufacturing, or mining activities relative to the whole of its business) and a company that is more passive in its operations.

26. It is arguable that an industrial company carries on business wherever its major operational activities relative to the whole of its business take place, notwithstanding that its CM&C may be located elsewhere. However, operational activities alone are not sufficient to make a company resident in Australia under the second statutory test, the company's CM&C must also be in Australia.

27. Where a company does not carry on major operational activities and the essence of its business is the investment of assets, it carries on business where those high level investment decisions are made - which may be where its CM&C is located. In these situations, the location of CM&C is indicative of where the company carries on business and vice versa.

The above indicates the Commissioner's approach is that a company which is more passive in its dealings and whose income earning outcomes are largely dependent on the investment decisions made in respect of its assets, carries on business where these investment decisions are made rather than where they are held which can be evidenced from where its CM&C is located.

Company A is a passive investment vehicle, holding the shares of other members of the Group. Company A has no direct business or trading operations in Australia and it is not employing anyone in Australia. It is considered that where Company A makes its investments decisions is where it carries on business, rather than where those investments are held. CM&C is a determinative factor in where a passive investment company carries on business, and Company A’s CM&C is not considered to be in Australia. Therefore it is not considered that Company A carries on business in Australia.

Voting power controlled by shareholders who are residents of Australia

The two largest shareholders are both Australia tax residents and currently own more than 50% of the shares in Company A. It is considered that these two shareholders control the voting power of Company A. Therefore it is considered that Company A has its voting power controlled by shareholders who are residents of Australia.

While Company A has its voting power controlled by shareholders who are residents of Australia, it is not considered that Company A carries on business in Australia and therefore Company A does not satisfy both aspects of the voting power test.

Conclusion

Company A does not satisfy the incorporation test, the CM&C test or the voting power test. Therefore, Company A is not a resident of Australia under subsection 6(1) of the ITAA 1936.

Question 2

Is Company B resident of Australia under subsection 6(1) of the ITAA 1936?

Detailed Reasoning

The term ‘resident’ in relation to a company is defined within subsection 6(1) of the ITAA 1936, and is defined at paragraph (b) of that term as:

(b) a company which is incorporated in Australia, or which, not being incorporated in Australia, 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.

The definition sets the criteria necessary to establish residency of a company. The first element of the definition states that a company which is incorporated in Australia, is a resident of Australia (the incorporation test). For a company incorporated in Australia, this is where the examination ends to determine if the company is a resident under the definition.

If a company is not incorporated in Australia, a company will be a resident under ‘the CM&C test’ of company residency in paragraph (b) if it carries on business in Australia and has its CM&C in Australia.

Alternatively, a company which is not incorporated in Australia will be a resident under ‘the voting power test’ if it carries on business in Australia and has its voting power controlled by shareholders who are residents of Australia.

Incorporation Test

Company B is not incorporated in Australia and is not a resident company under the incorporation test within subsection 6(1) of the ITAA 1936.

CM&C Test

Based on the facts and circumstances of this Ruling, it is considered that the CM&C for each of the three entities will be in the same location. Therefore it is important to consider CM&C in the context of the Group to determine the CM&C of Company B.

In accordance with the detailed reasoning for question 1 (to the extent it applies to Company B), the CM&C of Company B is not in Australia and it is not necessary to consider whether it carries on business in Australia in the context of the CM&C test.

Therefore, Company B is not a resident company under the CM&C test within subsection 6(1) of the ITAA 1936.

Voting Power Test

Company B is a wholly owned subsidiary of Company A. A PE is broadly defined as a place in a country at, or through which, a person carries on any business. It is noted Company B has a PE in Australia and therefore Company B carries on business in Australia.

Company B is 100% owned by Company A. The residency of Company B under the voting power test is dependent on the residency of Company A. As Company A is not a tax resident of Australia, the voting power of Company B is not controlled by shareholders who are residents of Australia.

While Company B carries on business in Australia, it does not have its voting power controlled by shareholders who are residents of Australia and therefore does not satisfy both aspects of the voting power test.

Therefore, Company B is not a resident company under the voting power test within subsection 6(1) of the ITAA 1936.

Conclusion

Company B does not satisfy the incorporation test, the CM&C test or the voting power test. Therefore, Company B is not a resident of Australia under subsection 6(1) of the ITAA 1936.

Question 3

Is Company C resident of Australia under subsection 6(1) of the ITAA 1936?

Detailed Reasoning

The term ‘resident’ in relation to a company is defined within subsection 6(1) of the ITAA 1936, and is defined at paragraph (b) of that term as:

(b) a company which is incorporated in Australia, or which, not being incorporated in Australia, 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.

The definition sets the criteria necessary to establish residency of a company. The first element of the definition states that a company which is incorporated in Australia, is a resident of Australia (the incorporation test). For a company incorporated in Australia, this is where the examination ends to determine if the company is a resident under the definition.

If a company is not incorporated in Australia, a company will be a resident under ‘the CM&C test’ of company residency in paragraph (b) if it carries on business in Australia and has its CM&C in Australia.

Alternatively, a company which is not incorporated in Australia will be a resident under ‘the voting power test’ if it carries on business in Australia and has its voting power controlled by shareholders who are residents of Australia.

Incorporation Test

Company C is not incorporated in Australia and is not a resident company under the incorporation test within subsection 6(1) of the ITAA 1936.

CM&C Test

Based on the facts and circumstances of this Ruling, it is considered that the CM&C for each of the three entities will be in the same location. Therefore it is important to consider CM&C in the context of the Group to determine the CM&C of Company C.

In accordance with the detailed reasoning for question 1 (to the extent it applies to Company C), the CM&C of Company C is not in Australia, it is not necessary to consider whether it carries on business in Australia in the context of the CM&C test.

Therefore, Company C is not a resident company under the CM&C test within subsection 6(1) of the ITAA 1936.

Voting Power Test

Company C is 100% owned by Company A. The residency of Company C under the voting power test is dependent on the residency of Company A. As Company A is not a tax resident of Australia, the voting power of Company C is not controlled by shareholders who are residents of Australia.

Therefore, Company C is not a resident company under the voting power test within subsection 6(1) of the ITAA 1936.

Conclusion

Company C does not satisfy the incorporation test, the CM&C test or the voting power test. Therefore, Company C is not a resident of Australia under subsection 6(1) of the ITAA 1936.