In Crown Insurance Services Ltd v Commissioner of Taxation (Crown), the issues raised are pertinent to the residence and source of the company under s6(1) of the Income Tax Assessment Act 1936. As cases are determined on the basis of all relevant facts and circumstances of each case, this analysis will focus on how the court’s decision process determined whether Crown had carried on business in the years 2004-2007 inclusive and the existence of central management and control (CM&C) in Australia. The purpose of this is to assess the valuation of Crown’s taxable income, which ultimately resulted in the objective decision to be set aside in favour of the applicant. Evaluation will be made in regards …show more content…
Although concerns regarding the potential width of the residence test were addressed through the release of TR 2004/15, there has been limited clarification when examining more extensive and minute details within different cases.
As mentioned above, a company’s residence relies upon its facts and circumstances. This forces the Australian Tax Office to make individual and subjective judgements when dealing with each presented case. The ATO is therefore unable to provide simple and efficient guidelines on how the law operates, rather relying on a case by case nature to deal with proceedings such as with Crown. As the current self-assessment system is operational and in full effect, this uncertainty makes it extremely difficult for taxpayers to determine their own residency status. This makes it impossible to administer and effectively implement from the perspective of the Australian Tax Office.
There have been numerous suggestions to amend this issue and an issuing of a Review of International Taxation Arrangements consultative paper in 2002 resulted the Board of Taxation recommending “the adoption of ‘incorporation in Australia’ as the sole test for corporate residency”. This would no doubt bring complete efficiency and validation to the current company residence law and thus Legislative Reform is high recommended as a means going forward. * Business of reinsurer? IT 2367