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


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