ATO Interpretative Decision
ATO ID 2006/212
Income tax
Temporary residents of Australia: residency status under the Australia-United Kingdom Double Taxation ConventionFOI status: may be released
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This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions.
Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series. The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953.
Status of this decision: Decision Current
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is a taxpayer, who is a temporary resident of Australia, a resident of Australia for the purposes of the Australia-United Kingdom Double Taxation Convention (the UK Convention)?
Decision
Yes. A taxpayer, who is a temporary resident of Australia, is a resident of Australia for the purposes of the UK Convention.
Facts
The taxpayer is a resident of Australia for the purposes of Australian tax.
The taxpayer is also a 'temporary resident' of Australia as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997).
The taxpayer derived pension income from the United Kingdom while the taxpayer was a temporary resident of Australia.
Reasons for Decision
Schedule 1 to the International Tax Agreements Act 1953 contains the UK Convention. Article 4(1) of the UK Convention provides that a person is a resident of Australia, for the purposes of this Convention, if the person is a resident of Australia for the purposes of Australian tax. However, Article 4(2) states that a person is not a resident of Australia, for the purposes of the UK Convention, where that person is liable to tax in Australia in respect of income or gains from sources in Australia only.
A taxpayer is 'liable to tax' in respect of foreign income or gains, if a provision of Australia's tax laws imposes a liability to tax foreign income or gains of that taxpayer, irrespective of whether that taxpayer actually derives foreign income or gains.
Under section 768-910 of the ITAA 1997, not all foreign income derived by a temporary resident is non-assessable non-exempt income. A temporary resident of Australia remains liable to Australian tax on foreign income that is either employment related income or consists of capital gains on shares and rights acquired under employee share schemes.
As temporary residents are liable to tax in Australia on certain income and gains from sources outside Australia, Article 4(2) of the UK Convention will not exclude them from being a resident for the purposes of the Convention. As a result, the taxpayer is a resident of Australia for the purposes of the UK Convention.
Date of decision: 3 August 2006Year of income: Year ended 30 June 2007
Legislative References:
Income Tax Assessment Act 1997
section 768-910
subsection 995-1(1)
Schedule 1
Schedule 1, Article 4(1)
Schedule 1, Article 4(2)
Related Public Rulings (including Determinations)
Taxation Ruling TR 2005/14
Taxation Ruling TR 97/19
Keywords
Double tax agreements
Foreign pension income
International tax
Resident/residency
Temporary resident
United Kingdom
ISSN: 1445-2782