Edited version of your private ruling

Authorisation Number: 1012127232577

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Subject: Residency

Questions and answers

Are you a temporary resident of Australia for tax purposes?

Yes

Are you a resident of Australia for tax purposes?

Yes

Will you be required to pay Australian tax on foreign income from investments while you remain a temporary resident?

No

Will you be liable to capital gains tax on foreign assets while you remain a temporary resident?

No

This ruling applies for the following period

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commenced on

1 July 2011

Relevant facts

You and your spouse are citizens of Country X and Country Y.

Your country of origin is Country Y.

You are both retired from the workforce.

You have an adult child who lives in Australia.

You have been living in Country X for a number of years.

You intend to move to Australia and live here for three years.

You will rent a place to live with your spouse.

You will transfer your investments from Country X to Australia when you arrive here.

You have income and assets from three different countries, this includes rental income from overseas investment properties and investment income from bank accounts.

You will enter Australia with your spouse under a special category visa (SCV).

Neither you nor your spouse will be an Australian resident within the meaning of the Social Security Act 1991.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 995-1 (1)

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Subsection 6-5(2)

Rulings and Determinations

Taxation Ruling TR 98/17

Other References

Migration Act 1958

Social Security Act 1991

Australian Immigration Fact Sheet (www.immi.gov.au)

Reasons for decision

Temporary resident

Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a taxpayer is a temporary resident if:

· they hold a temporary visa granted under the Migration Act 1958

· they are not an Australian resident within the meaning of the Social Security Act 1991, and

· their spouse is not an Australian resident within the meaning of the Social Security Act 1991

The Migration Act 1958 provides that a temporary visa is a visa to travel to and remain in Australia:

· during a specified period

· until a specified event happens, or

· while the holder has a specific status

Under the Social Security Act 1991, an Australian resident is a person who resides in Australia and is either an Australian citizen or holds a permanent resident visa.

You have advised the following:

· you will hold a temporary resident visa granted under the Migration Act 1958 upon your arrival in Australia

· you are not an Australian resident within the meaning of the Social Security Act 1991 because you are not an Australian citizen or hold a permanent resident visa, and

· your spouse is not an Australian resident within the meaning of the Social Security Act 1991, as she is not an Australian citizen or a holder of a permanent resident visa

As you will satisfy the conditions for a temporary resident as defined in subsection 995-1(1) of the ITAA 1997, you will be a temporary resident of Australia for tax purposes.

Residency

An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are: 

· the resides test,

· the domicile test,

· the 183 day test, and

· the superannuation test.

The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides.

If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other tests.

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3^rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'.

Taxation Ruling TR 98/17 considers the residency status of individuals entering Australia and states that the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here. However, an individuals behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here.

In your case, you will be an Australian resident for tax purposes under the resides test for the following reasons:

You have advised you are moving here with your spouse and will live in Australia for three years

You will live in permanent rental accommodation with your spouse

You will transfer your investments from Country X to Australia when you move here

As you meet the resides test, the remaining three tests do not need to be considered.

Income

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 during the income year.

Interest income and rental income is ordinary income for the purposes of the ITAA 1997.

Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year.

However, the foreign source income exemption for temporary residents, contained in section 768-910 of the ITAA 1997, provides an exemption for most foreign income derived by temporary residents of Australia.

In particular, section 768-910 of the ITAA 1997 provides that foreign income, excluding employment related income and capital gains on shares and rights acquired under employee share schemes, is not assessable for income tax in Australia when derived by a person who is a temporary resident of Australia.

In your case, your foreign income is not employment related nor will you have capital gains on shares and rights, therefore your foreign income is not assessable in Australia while you remain a temporary resident of Australia.

Capital gains tax (CGT)

For CGT event that happen on or after 1 July 2006, temporary residents are subject to the same CGT rules as foreign residents. This means that a temporary resident will be subject to CGT on CGT events that happen on or after 12 December 2006 to taxable Australian property.

As you do not have any taxable Australian property this will not apply to you.

Tax rates

These rates apply to individuals who are Australian residents for tax purposes.

The following rates for 2011-12 apply from 1 July 2011.

The above rates do not include the Medicare levy of 1.5%.

The above rates do not include the Flood levy.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).