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Edited version of your private ruling
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Ruling
Subject: Foreign income exemption for temporary residents
Question 1 and answer:
Were you a temporary resident of Australia from late 2009 to early 2012?
Yes.
Question 2 and answer:
While you were a temporary resident of Australia, was the income you earned from your overseas assets exempt from income tax in Australia?
Yes.
This ruling applies for the following periods:
Year ended 30 June 2010
Year ended 30 June 2011
Year ended 30 June 2012
The scheme commences on:
1 July 2009
Relevant facts and circumstances
You arrived in Australia with your spouse and child under a temporary resident visa granted under the Migration Act 1958.
You and your family were citizens of a foreign country at the time of your arrival in Australia.
You and your family obtained Australian permanent residency status in early 2012.
The overseas assets you owned during the relevant period included a house property, bank deposits and company shares.
None of the overseas assets you owned during the relevant period included shares issued under an employee share scheme.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5,
Income Tax Assessment Act 1997 section 995-1,
Income Tax Assessment Act 1997 Subdivision 768-R,
Migration Act 1958, and
Social Security Act 1991.
Reasons for decision
Question 1
Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) states that you are a temporary resident of Australia if:
· you hold a temporary visa granted under the Migration Act 1958;
· you are not an Australian resident within the meaning of the Social Security Act 1991; and
· your spouse is not an Australian resident within the meaning of the Social Security Act 1991.
Under the Social Security Act 1991, an Australian resident is generally a person who resides in Australia and is either an Australian citizen or holds a permanent resident visa.
In your case, you arrived in Australia with your spouse and child and obtained Australian permanent residency status in early 2012. You are considered to have been a temporary resident of Australia from late 2009 to early 2012 as:
· you held a temporary visa granted under the Migration Act 1958;
· you were not an Australian resident within the meaning of the Social Security Act 1991 as you were not an Australian citizen and you did not hold a permanent resident visa at that time; and
· your spouse was not an Australian resident within the meaning of the Social Security Act 1991 as your spouse was not an Australian citizen and did not hold a permanent resident visa at that time.
You were a temporary resident of Australia from late 2009 to early 2012.
Question 2
Section 6-5 of ITAA 1997 provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia.
However, where you are a foreign resident (non resident) for taxation purposes, your assessable income includes only income derived from an Australian source.
Subdivision 768-R of the ITAA 1997 provides that where you are a resident of Australia for taxation purposes and also meet the requirements to be a temporary resident of Australia you will be subject to the following temporary resident rules:
Any income you earn from an overseas source will not be taxed in Australia except income earned from employment performed overseas for short periods while you are a temporary resident.
Any capital gain you make from a capital gains tax event that relates to an asset located in an overseas country will not be taxed in Australia.
Special rules apply to capital gains on shares and rights acquired under employee share schemes.
As a consequence of the above, any income you earn, or capital gains you make, from assets held outside Australia will not be taxed in Australia if you are a temporary resident of Australia, regardless of whether you are a resident or a non resident of Australia for taxation purposes.
In your case, your overseas assets included a house property, bank deposits and company shares. Therefore, you are not required to pay Australian income tax on any income you earned, or capital gains you made, from your overseas assets when you were a temporary resident to early 2012.
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