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Edited version of your written advice
Authorisation Number: 1012991930786
Date of advice: 1 April 2016
Ruling
Subject: Residency status
Questions and Answers
1. Are you an Australian resident for tax purposes?
Yes
2. Are you a temporary resident?
Yes
3. Is your foreign sourced pension assessable in Australia?
No
4. Is your Australian sourced income assessable in Australia?
Yes
This ruling applies for the following periods
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
Year ended 30 June 2018
Year ended 30 June 2019
The scheme commenced on
1 July 20XX
Relevant facts and circumstances
You and your spouse migrated to Australia from Country A in the relevant income year.
You were granted a temporary resident visa in the relevant income year. The visa must be renewed.
You intend to keep renewing your visa.
You are not a permanent resident of Australia and do not intend to hold a permanent resident visa or become an Australian citizen.
You built a home in Australia which is your sole place of residence. You no longer own any property in Country A
Your only source of income from overseas is your pension.
You earn investment income from Australian sources.
You and your spouse are not residents of Australia for the purposes of the Social Security Ac 1991.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 6(1).
Income Tax Assessment Act 1997 Subsection 6-5(2).
Income Tax Assessment Act 1997 Subsection 6-10(4).
Income Tax Assessment Act 1997 Section 768-910.
Reasons for decision
Subsection 6-5(2) and subsection 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997) provide that the assessable income of a resident taxpayer includes ordinary income and statutory income derived directly or indirectly from all sources during the income year. However, where an Australian resident is also a temporary resident their foreign sourced income may not need to be included in their assessable income.
The terms resident and resident of Australia are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (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
• 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 then the remaining three tests do not need to be considered as residency for Australian tax purposes has already been established.
In your case you are an Australian resident for tax purposes as you have been residing at a permanent address for a period of time, your spouse lives with you in Australia and it is your intention to reside in Australia permanently and to continue renewing your visa every four years.
Temporary Resident
From 1 July 2006, taxpayers who are temporary residents have not had to pay tax in Australia on most of their foreign income if they:
• are an individual who is an Australian resident for tax purposes, and
• satisfy the requirements of being a temporary resident.
A taxpayer will be 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.
In your case you are a temporary resident because:
• you hold a temporary resident visa granted under the Migration Act 1958
• 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
• you do not have a spouse who is an Australian resident within the meaning of the Social Security Act 1991.
Section 768-910 of the ITAA 1997 provides that ordinary income derived from a foreign source (excluding employment related income and capital gains on shares and rights acquired under employee share schemes) will be exempt from income tax in Australia when derived by a temporary resident in Australia. This income is known as non-assessable, non-exempt income.
In your case, you are a temporary resident. As you receive a foreign sourced pension this income will be non-assessable non-exempt income and therefore will not be included as assessable income in Australia.
The temporary residence provisions however, have no effect as far as Australian sourced income is concerned. Where you receive Australian sourced income you will still be required to include Australian sourced income in your assessable income in accordance with subsections 6-5(2) and 6-10 (4) of the ITAA 1997.
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