ATO Interpretative Decision

ATO ID 2001/771 (Withdrawn)

Income Tax

Assessability of UK rental income - Australian resident taxpayer
FOI status: may be released
CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 income derived by an Australian resident taxpayer from a rental property in the United Kingdom (UK), included in the assessable income of the taxpayer under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes. Income derived by an Australian resident taxpayer from a rental property in the UK, is included in the assessable income of the taxpayer under section 6-5 of the ITAA 1997.

Facts

The taxpayer is a resident of Australia for taxation purposes.

The taxpayer owns an investment property in the UK.

The taxpayer earns rental income from the property.

Reasons for Decision

Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources whether in or out of Australia during the income year.

Real property that generates income and is located in the UK is subject to tax in the UK as the income is regarded as being derived from the place at which the property is located. However, agreements that Australia has with various countries under the International Tax Agreements Act 1953 (the Agreements Act) operates to prevent the double taxation of income.

Subparagraph 19(2)(a) of Schedule 1 to the Agreements Act provides that a credit shall be allowed against Australian tax assessed for UK tax payable by a resident of Australia from sources in the UK.

The Australian resident taxpayer has derived income from a rental property in the UK on which tax is payable in the UK. Although subject to tax in the UK, the income is also assessable in Australia under section 6-5 of the ITAA 1997 as a resident taxpayer's assessable income includes ordinary income from all sources whether in or out of Australia. However, the taxpayer will be entitled to a foreign tax credit for the tax paid in the UK on the rental income.

Date of decision:  18 September 2001

Legislative References:
Income Tax Assessment Act 1997
   subsection 6-5(2)

International Tax Agreements Act 1953
   Schedule 1, Article 19(2)(a)

Related ATO Interpretative Decisions
ATO ID 2001/719
ATO ID 2001/772

Keywords
Passive foreign income
Rental property income

Business Line:  Small Business/Individual Taxpayers

Date of publication:  7 December 2001

ISSN: 1445-2782

history
  Date: Version:
  18 September 2001 Original statement
You are here 12 May 2006 Archived

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