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Question 1: Farm Limited is incorporated in Australia and controlled by its directors from New Zealand. Farm Limited is a 90 per cent owned subsidiary of Chong Limited, a Hong Kong Company. Dairy Limited is a New Zealand incorporated company that is controlled by its directors from New Zealand and has its centre of management in New Zealand. Dairy Limited is also a 70 per cent subsidiary of Chong Limited. During the income year ending 31 March 2020, Farm Limited incurs a loss of $5 million and Dairy Limited earns taxable profit of $7 million. Which one of the following statements is correct?
Select one:
a. The $5 million loss of Farm Limited cannot be grouped with the taxable profit of Dairy Limited
b. The $5 million loss of Farm Limited can be grouped with the taxable profit of Dairy Limited under the directors control test
c. The $5 million loss of Farm Limited can be grouped with the taxable profit of Dairy Limited under both the directors control test and centre of management test
d. The $5 million loss of Farm Limited can be grouped with the taxable profit of Dairy Limited under the centre of management test
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