Central Management & Control — the risk inside every nominee director arrangement
Under Australian tax law, a foreign company may be assessed as an Australian tax resident based entirely on where its real decisions are made — not where it is incorporated, not where its directors formally reside, and not where board meetings appear on paper to have taken place. If an Australian resident is directing a foreign company through a nominee director, that company may already be an Australian tax resident.
Enforcement environment, 2026: Singapore's Register of Nominee Directors (ROND) became publicly visible from 31 December 2025. ACRA data — including nominee director registrations and nominator identity — is shared with the ATO annually under the Common Reporting Standard. Australian tax residents with Singapore or Hong Kong nominee director arrangements are now being identified to the ATO systematically and automatically.
The Australian corporate residency test
Section 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) sets out the conditions under which a company that is not incorporated in Australia is nonetheless treated as an Australian tax resident.
A company that is not incorporated in Australia is a resident of Australia for tax purposes if it carries on business in Australia and satisfies at least one of two additional tests:
The Voting Power Test
The voting power of the company is controlled by shareholders who are residents of Australia. This test focuses on the ownership and voting structure of the company.
The CM&C Test
The central management and control of the company is exercised in Australia. Following the High Court's decision in Bywater, satisfying this test alone is sufficient to constitute carrying on business in Australia.
"The residence of a company is first and last a question of fact and degree to be answered according to where the central management and control of the company actually abides."Bywater Investments Limited v Commissioner of Taxation [2016] HCA 45 — High Court of Australia
The location of a company's central management and control is determined by two questions of substance:
- — Where is the company controlled and directed as a matter of substance — not as a matter of form or documentation?
- — How is that control and direction exercised over time — and where do the people who actually make decisions perform those activities?
A nominee director cannot exercise genuine CM&C
When examining the typical nominee director service offered by corporate secretarial firms in Singapore, Hong Kong, and the UAE, the service is structurally incapable of satisfying the CM&C test.
Under Singapore's Corporate Services Providers Act 2021 (CSPA), a nominee director is formally defined as "a director who is accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of any other person."
The typical nominee director arrangement is described to clients in these terms:
- ✕ Has no operational duties in the company
- ✕ Is appointed in name only and will have no role except to satisfy the statutory requirement for a local resident director
- ✕ Is non-executive and will not be involved in any management, financial, or operational matters of the company
Where the nominee director performs none of these functions, the ATO's position — confirmed by the High Court in Bywater — is that the nominee cannot be seen to provide any level of management and control outside of Australia. The result is that the real decision-maker — the Australian-resident beneficial owner issuing instructions — is treated as exercising CM&C in Australia.
It is important to understand that this is not a legal technicality or an aggressive interpretation. It is a question of fact: where are the real decisions actually made? If an Australian resident is directing the company's affairs, the answer is Australia — regardless of where the nominee director is located or where board minutes record decisions as having been made.
The 13 factors the ATO applies when assessing CM&C
No single factor is determinative. The ATO considers the collective weight of multiple factors together. These factors are drawn from ATO Taxation Ruling TR 2018/5 and Practical Compliance Guideline PCG 2018/9, issued following the Bywater decision.
Location of High-Level Decision Making
Where the real business of the company is carried on — where key strategic decisions are made. Assessed as a question of substance, not documentation.
Nature of the Decisions Made
High-level decisions: setting general policy, determining the direction of operations, deciding on major capital assets, funding arrangements, and the declaration of dividends.
Location of Board Meetings
Where directors physically meet to exercise their powers of control. The ATO focuses on where decisions are actually made — not merely where board minutes record them as having been made.
Board Minutes and Documentation
Completeness and accuracy of board minutes as prima facie evidence of who made decisions, where they were made, and whether they genuinely reflect the exercise of CM&C.
Substance Over Form — Rubber-Stamping
Whether local directors genuinely exercise independent discretion, or merely mechanically implement decisions already made by others. This was the determinative factor in Bywater.
Identity of the Real Decision-Makers
Who, as a matter of fact, exercises the ultimate power of control and direction — even where that person lacks formal legal authority. The beneficial owner issuing instructions from Australia is the paradigm case.
Location of Directors When Participating
Where directors are physically located when participating in board meetings — including meetings conducted by video conference. Physical location at the time of decision is relevant.
Nature of the Company's Activities
For a simple SPV, investment holding vehicle, or family office structure, the key transactions are the CM&C. For operational companies, the analysis distinguishes between high-level strategic decisions and day-to-day management.
Contemporaneous Correspondence and Records
Emails, internal memoranda, and oral evidence — particularly when board minutes are missing, incomplete, or considered unreliable as evidence of genuine decision-making.
Day-to-Day Management vs. CM&C
Whether operational management effectively constitutes high-level control — most relevant for small, low-activity, or passive companies where the two functions are not separated.
Place of Incorporation
For the CM&C test specifically, the foreign place of incorporation is not determinative. A company incorporated in Singapore or Hong Kong is not automatically non-Australian-resident for tax purposes.
Location of Share Register, Company Secretary, and Administrative Tasks
Matters of company administration — maintaining accounts, paying dividends, keeping the share register — are not generally acts of central management and control.
Residence of Directors When Not Making Decisions
The private residence of directors is generally less important than the location where they actually gather and exercise their power of control and direction.
Bywater Investments Limited v Commissioner of Taxation [2016] HCA 45
The most significant case in Australian tax law on the CM&C test. The High Court's unanimous decision in November 2016 fundamentally changed the enforcement landscape for foreign-incorporated companies with Australian connections.
Four foreign-incorporated companies
Incorporated in Switzerland and Samoa. Directors were non-resident and board meetings formally took place offshore. Profits were derived from trading on the Australian Stock Exchange.
An Australian resident made the decisions
Every significant decision was directed by an Australian-resident individual. The offshore directors merely rubber-stamped those instructions without genuinely considering whether they were in the best interests of the company.
Australian tax residents — unanimously
The High Court unanimously found all four companies were Australian tax residents. The formal offshore structure was entirely disregarded. The companies could not escape Australian tax liability on the basis that they were resident abroad.
"Central management and control exercised in Australia alone is sufficient to constitute carrying on business in Australia, triggering full Australian corporate tax liability."Bywater Investments Limited v Commissioner of Taxation [2016] HCA 45 — High Court of Australia (unanimous)
- › Substance over form. Corporate residence is determined by where CM&C actually abides — not by where constitutional documents say it should be, or where board meetings are formally recorded.
- › Rubber-stamping is disregarded. Directors who merely mechanically implement instructions given by others are not exercising CM&C. The person giving those instructions — wherever they are — is the real decision-maker.
- › CM&C alone satisfies the residency test. The exercise of CM&C in Australia is itself sufficient to constitute carrying on business in Australia. The two limbs of the statutory test are effectively conflated.
Following the Bywater decision, the ATO issued Taxation Ruling TR 2018/5 (Income Tax: central management and control test of residency) and Practical Compliance Guideline PCG 2018/9. Together, these set out the Commissioner's view on how the test applies — including the 13 factors above. TR 2018/5 replaced the previous Taxation Ruling TR 2004/15, which had taken a more limited view of the test.
What Australian tax residency means in practice
Where the ATO determines that a foreign company is an Australian tax resident under the CM&C test, the consequences are retrospective and can be significant.
Corporate income tax at 30%
Australian corporate tax assessed at 30% on the company's taxable income — less any foreign corporate tax already paid on the same income. This applies for every year the arrangement has been in place, not merely from the date of assessment.
Retrospective assessment for every year
The ATO can assess Australian tax for each year of income during which the CM&C arrangement was in place. For structures that have operated for multiple years, the cumulative liability can be very substantial.
Penalties and fines
Where the ATO determines that tax has been incorrectly assessed or not assessed at all, penalties can apply in addition to the primary tax liability. Amounts depend on the nature of the conduct and whether voluntary disclosure has occurred.
General interest charge — non-deductible
The General Interest Charge accrues on any unpaid tax liability from the date it became payable. It is non-deductible — representing a pure additional cost with no tax offset available.
Why this risk is now systematically enforced
The CM&C risk has existed as a matter of law since Bywater in 2016. What has changed is the ATO's ability to identify nominee director arrangements automatically, at scale, without conducting individual audits.
Register of Nominee Directors (ROND) — Singapore
All Singapore companies are required to file their Register of Nominee Directors with ACRA, containing the particulars of each nominee director and their nominator. Companies incorporated on or after 16 June 2025 must file at incorporation. Penalties for non-compliance: SGD 25,000 per breach.
BizFile Public Disclosure
From 31 December 2025, nominee director status became publicly visible on a company's BizFile+ profile. The nominator's identity is accessible to public agencies including tax authorities. This is no longer a confidential arrangement.
Common Reporting Standard (CRS) — Automated ATO notification
Under the CRS, ACRA data — including nominee director registrations — is reported to the ATO annually. Australia has participated in the CRS since 1 July 2017. The combination of ROND and CRS means that Australian tax residents using nominee directors are now systematically identified to the ATO without any need for targeted audit activity.
How the DTA interacts with the CM&C test
Where there is potential for a company to be taxed in both Singapore and Australia, the Singapore–Australia Double Taxation Agreement 1969 is the governing document. However, the DTA does not offer the protection that many assume.
Under the DTA, the term "Australian company" is defined to include:
Definition of "Australian company"
(i) is incorporated in Australia and has its centre of administrative or practical management in Australia whether or not any person outside Australia exercises or is capable of exercising any overriding control or direction of the company or of its policy or affairs in any way whatsoever; or
(ii) is managed and controlled in Australia."
Under limb (ii), a Singapore-incorporated company that is managed and controlled in Australia — through the exercise of CM&C in Australia by an Australian-resident beneficial owner operating through a nominee director — falls squarely within the definition of an Australian company under the DTA itself.
The DTA's tie-breaker provisions are relevant where genuine dual residency arises. Where the CM&C test is satisfied in Australia, the DTA does not automatically resolve the position in the company's favour.
The question to ask — and the answer ONUS Directors provides
If you are an Australian tax resident who owns a Singapore or Hong Kong company through a nominee director, the central question is straightforward: who actually makes the decisions for that company?
If the answer is you — sitting in Australia, issuing instructions that the nominee signs off — then as a matter of Australian tax law, and on the authority of the High Court in Bywater, the central management and control of your company is likely exercised in Australia. Your company may be an Australian tax resident.
The solution is not to create better documentation of offshore board meetings. The ATO and the courts look through paper structures to the substance of what actually happens. The solution is to appoint a genuine, active director — one who exercises real, independent governance authority, reviews and approves decisions on the basis of their own independent judgement, is the sole authorised signatory on the company's bank accounts, and whose engagement is supported by institutional-grade contemporaneous documentation.
That is precisely what ONUS Directors provides. Our active fractional directorship service is designed to ensure that the substance, not just the form, of central management and control is exercised in Singapore or Hong Kong.
The information on this page is provided for general informational and educational purposes only, drawing on published materials including ATO Taxation Ruling TR 2018/5, PCG 2018/9, and the High Court's decision in Bywater Investments Limited v Commissioner of Taxation [2016] HCA 45. It does not constitute Australian tax advice and is not specific to the facts of any particular company or individual. ONUS Directors Pte Ltd provides active directorship and governance services and does not provide Australian tax advice. You should obtain independent advice from a qualified Australian cross-border tax adviser regarding your specific circumstances.