The company residency rules are proposed to be modified such 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 if both:
- The company’s core commercial activities are undertaken in Australia; and
- Its central management and control is in Australia.
To some extent this is meant to alter the application of the current central management and control test for company residency by creating a higher threshold than simply carrying on a business in Australia. Recent guidance from the ATO on that test has indicated that a company that carries on a business anywhere would be treated as a resident of Australia if its central management and control is in Australia to some extent.