Australia: ATO updates guidelines on central management and control test of residency

The Australian Taxation Office (ATO) has released updated guidelines that give foreign companies greater certainty about the compliance under the central management and control test.

For better clarification to foreign companies regarding their residency position, the Practical Compliance Guideline PCG 2018/9 includes a risk assessment framework that highlights ATO’s compliance approach according to three risk zones:

  • Low – ATO will not allocate resources to review a company’s residency position
  • Medium – ATO may further analyze a company’s residency position and tax outcomes through ordinary engagement and assurance activities.
  • High – a company is highly likely to be subject to compliance activity.

Introduced in 2017, the transitional compliance approach allowed certain businesses to review and adjust their governance arrangements to maintain their status as non-residents, ending on 30 June 2023. The updates include changes based on feedback on the Draft Practical Compliance Guideline.

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