Tax Law Assignment: Analyzing Littlefun Company's Tax Residency Status

This assignment analyzes the tax residency of Littlefun Company under Australian tax law, specifically focusing on the provisions of ITAA 1936. The solution addresses the key issue of whether Littlefun Company is an Australian resident for tax purposes. The analysis involves applying the 'place of incorporation test,' 'central management and control test,' and 'controlling share test' to the company's structure and operations. The assignment considers the company's incorporation in Singapore, the location of its directors, and the decision-making authority of Mr. Ed. The conclusion determines that Littlefun Company is an Australian resident based on the central management and control being located in Australia. The solution references relevant legal cases and scholarly articles to support its arguments, providing a comprehensive understanding of the tax residency determination process.

Running head: TAX LAWS
Tax Laws
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Table of Contents
Answer to question 1:.................................................................................................................2
Issues:.....................................................................................................................................2
Rule:.......................................................................................................................................2
Application:............................................................................................................................3
Conclusion:............................................................................................................................4
References:.................................................................................................................................5

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Answer to question 1:
Issues:
Is the central organization and operation of Littlefun Company being in Australia? Is
Littleful Company an Australian occupant for tax purpose under “sec 6 (1) ITAA 1936”?
Rule:
To ascertain the company’s residency position only one of three test should be met.
This includes;
(1) “Place of incorporation test”
(2) “Central management and control test”
(3) “Controlling share test”
Place of incorporation test:
An organization that is established in Australia within the “Corporations Act 2001
(Cth)” is normally viewed as the tax occupant of Australia, notwithstanding of any other
aspects.
The test of Central management and control:
A corporation is held to be an Australian occupant company within “sec 6 (1) ITAA
1936” if the business is conducting its business activities in Australia and has the “central
administration” as well as control in Australia (Woellner et al., 2016). A corporation would
be treated as Australian occupant if the company whose income is very much dependent on
the investment decision carrying on the business where those decisions are taken often
signifies that the “central management and control” is located. As noted in “Malayan
Shipping Co Ltd v FCT (1946)” the taxpayer incorporated the company in Singapore (Sadiq

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2019). The law court noticed that the fundamental management as well control was located in
Australia because Mr Sleigh implemented full control on the business operations.
Control of voting power test:
A corporation is normally viewed as “resident of Australia” provided the company is
carrying the business in Australia and has the power of voting which is controlled by
shareholders that are considered resident of Australia (Barkoczy 2016). The shareholder here
should be registered shareholder in the register of company.
Application:
The case study provides that Littlefun Company is established by Ed, being an
Australian occupant. The company is found to be incorporated in Singapore with two of its
directors are resident of Singapore. Ed, does not attends meetings conducted by board but
provides decisions to the directors which are central to the business operations.
Incorporation Test:
Littlefun Company is not established in Australia. Therefore, it is not an Australian
occupant company within this test.
Central management & Control:
Littlefun Company has substantial amount of business operations in Australia. Most
importantly the income of Littlefun Company is reliant mainly on the investment decision
made by Mr Ed. Referring to the “Malayan Shipping Company Ltd v FCT (1946)” Littlefun
Company has its “central management” as well as control located in Australia since Mr Ed is
found to be exercising full control over the business operations (Freudenberg et al. 2017).
Hence, under “sec 6 (1) ITAA 1936”, Littlefun Company is an Australian resident.
Control of voting power:

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As two of the three shareholders of Littlefun Company are resident of Singapore, the
voting power of the shareholders is not Australia. This test is not applicable in this case.
Conclusion:
Conclusively, Littlefun Company is an Australian occupant corporation under “sec 6
(1) ITAA 1936” because the business has “central management and control” in Australia.

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References:
Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.
Freudenberg, B., Chardon, T., Brimble, M. and Isle, M.B., 2017. Tax literacy of Australian
small businesses. J. Austl. Tax'n, 19, p.21.
Sadiq, K., 2019. Australian Taxation Law Cases 2019. Thomson Reuters.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation
Law 2016. OUP Catalogue.