Sense & Non-sense - Corporate Tax Residency

Updated: Jan 27

The Board of Taxation has delivered its report to the Treasurer recently on proposed changes to how Australia's tax residency laws should apply to foreign companies.

Much of the report is concerned with the Board's view that the judicial outcome in Bywater, and the ATO's interpretation of it, means that urgent change is needed to Australia's laws in this area.

The Board is not happy that the location of central management and control has assumed such major importance in determining the question of whether a foreign company could be resident here.

For its part the Government has announced in the Budget this month that it will amend the law following the Board's recommendation.

The New Test

The new test proposed by the Board, is that a foreign company should be considered resident of Australia if that company has a 'significant economic connection' to Australia.

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