Australia: Guidance on residency central management and control test, including new risk-free assessment framework
Updated guidance on the central management and control test of residency
Updated guidance on the central management and control test of residency
The Australian Taxation Office (ATO) on 28 June 2023 released updated guidance on the central management and control (CMC) test of residency—Draft Practical Compliance Guideline PCG 2018/9DC1—which updates PCG 2018/9.
The updated draft PCG includes a new risk assessment framework to assist foreign-incorporated companies to further understand when their circumstances may be low risk or when the ATO might apply compliance resources to review their corporate residency status under the CMC residency test.
KPMG observation
The updated guidance must be read in conjunction with Taxation Ruling TR 2018/5 which sets out the Commissioner’s views on how to apply the CMC residency test.
PCG 2018/9DC1 comes as the transitional approach under the original PCG 2018/9 ended on 30 June 2023, which applied to a foreign incorporated company that had previously relied on TR 2004/15 to establish that it was not a resident of Australia (but would have become a resident under the CMC residency test per the Commissioner’s revised view in TR 2018/5).
In addition, the timely release of PCG 2018/9DC1 closely follows the introduction of Schedule 1 of Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill 2023 on 22 June 2023 which requires that for financial years commencing on or after 1 July 2023, Australian public companies (listed and unlisted) disclose information about subsidiaries in their annual financial reports including the tax residency of each of those entities during the financial year.
Read a July 2023 report [PDF 277 KB] prepared by the KPMG member firm in Australia
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.