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3.2.2. Carrying on Business in Australia

The manner in which the test regarding carrying on business in Australia and central management and control will apply in practice is set out by the Australian Tax Office in Taxation Ruling TR 2004/15.

Whether a company is carrying on a business is usually a question of fact to be established based on the circumstances of each case. Though carrying on a business in a place and exercising central management and control in that place are two distinct activities, the ATO recognizes that there may be instances in which the nature of the business or the level of control over the business requires the exercise of central management and control at the place where the business is carried on. In such cases, the location of the central management and control may be taken to be indicative of where the company carries on its business and vice-versa.

For this purpose, the Commissioner draws a broad distinction between companies with operational activities, such as trade, service provision, manufacturing and mining, from other companies engaged in passive activities. In the case of the former, it is recognized that the place where the operational activities are carried on would normally be the place of business, which need not be the same as the place where its central management and control is situated. However, for companies engaged in passive activities, where their "income earning outcomes are largely dependent on the investment decisions made in respect of its assets", their business is carried on in the place where such decisions are made, which would often be the place where their central management and control is also located.