The Board of Taxation released its report Review of Corporate Tax Residency on 6 October 2020. The report was completed in July 2020.
The Government announced in the Budget that it will make technical amendments to the rules to clarify the corporate residency test which are to be “consistent” with the report.
The Board has also released 20 submissions dealing with the proposal, which make for interesting reading (there were a further 6 that were submitted on the basis of confidentiality).
The amendments will provide that a company that is incorporated offshore will be treated as an Australian tax resident if it has a “significant economic connection to Australia”.
|This test will be satisfied where both the company’s core commercial activities are undertaken in Australia and its central management and control is in Australia. |
This change will mean the treatment of foreign incorporated companies will reflect the corporate residency position prior to the 2016 High Court decision in Bywater Investments Ltd & Ors v FCT  HCA 45.
It will have effect from the first income year after the date of assent of the enabling legislation, but taxpayers will have the option of applying the new law from 15 March 2017 (the date on which the ATO withdrew its ruling TR 2004/15).