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Edited version of your written advice
Authorisation Number: 1051491623109
Date of advice: 22 March 2019
Ruling
Subject: Temporary residency
Question 1
Are you a temporary resident of Australia for the purposes of Subdivision 768-R of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
Having considered all of the facts, circumstances and relevant legislation, the Commissioner considers that you meet the definition of a temporary resident under section 995-1 of the ITAA 1997. More information about temporary residency can be found by searching for ‘QC18869’ on ato.gov.au
Question 2
Does the Commissioner consider that the Foundation is a trust for the purposes of applying Australian taxation law to distributions you receive from it?
Answer
Yes.
As the Foundation has legal ownership of assets which it holds for the benefit of beneficiaries, the Commissioner considers that the Foundation is a trust.
Question 3
Will the distributions from the Foundation have a foreign source?
Answer
Yes.
The Foundation was established overseas. The Foundation’s assets and the Foundation Council, which makes all decisions in relation to the Foundation, are all located overseas. Consequently, the Commissioner accepts that any distributions you receive from the Foundation will have a foreign source.
Question 4
Will the distributions you receive from the Foundation be included in your assessable income?
Answer
No.
As the distributions have a foreign source, any amount of the distributions that is either ordinary or statutory income will be non-assessable, non-exempt income under section 768-910 of the ITAA 1997.
Question 5
Do you disregard any capital gain in relation to the distributions you will receive from the Foundation?
Answer
Yes.
As no assets of the Foundation are taxable Australian property, any capital gain or loss in relation to the distributions will be disregarded under section 768-915 of the ITAA 1997.
Question 6
Will the transferor trust provisions apply to attribute income to you?
Answer
No.
Based on the facts provided, you will be a temporary resident for the entire income years ruled on. Consequently, due to the operation of section 768-970 of the ITAA 1997, the transferor trust provisions will not apply to attribute income to you.
This ruling applies for the following periods:
Year ending 30 June 20XX
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You are not an Australian citizen.
You moved to Australia to reside on XX/XX/201X. You entered Australia from New Zealand on a New Zealand passport on a special category visa, subclass 444.
You do not have a spouse.
The Foundation
The Foundation was established outside Australia.
The Founder of the Foundation was your Parent.
The registered office of the Foundation has always been outside Australia.
The current address for service of the Foundation is not in Australia.
The Foundation has never been managed or controlled from Australia.
Articles of Association of the Foundation
Article 1 provides that the Foundation has its own legal personality and has been established for an unlimited duration.
Article 2 provides that the Foundations assets amount to XXXX. The Founder and/or third parties may contribute assets of any kind to the Foundation.
Article 3 provides that the purpose of the Foundation is to defray the costs of education and training, endowment and support or maintenance in general of members of one or more specific families and pursue similar purposes.
The Foundation may also make distributions to natural or legal persons, institutions and the like.
The Foundation does not conduct business of a commercial nature.
Article 4 provides that the governing bodies of the Foundation are the Foundation Council and the legal representative.
Article 6 provides that the Foundation Council manages the Foundation. The Foundation Council may revoke or modify regulations in whole or part unless the regulation expressly prohibits it.
Article 8 provides for the legal status of beneficiaries.
Beneficial interest may only be disposed of with the consent of the Foundation Council.
The withdrawal or modification of a beneficial interest shall not create a liability for compensation or constitute an enforceable claim.
Beneficiaries cannot be divested of their beneficial interests by their creditors by way of attachment, execution or bankruptcy proceedings.
Article 10 provides that the Foundation Council shall be entitled to make amendments to these Articles.
If the circumstances under which the Foundation has been established change to such an extent that the purpose of the Foundation can no longer be reasonably attained, the Foundation Council shall be entitled to dissolve the Foundation. The resolution of dissolution requires a unanimous vote.
The Foundation Council shall decide on the appropriation of the Foundation’s assets in the event of dissolution in accordance with the regulations issued.
Regulations of the Foundation
Regulation 1 provides that your Parent shall be solely entitled to claim during their lifetime the Foundation’s assets and its income.
Regulation 2 provides that in the event of the death of your Parent, their rights shall devolve upon their spouse (your other parent) and children as follows:
● XX% to your other parent;
● XX% to you;
● XX% to your sibling.
Should your other parent predecease you and your sibling, their share shall pass over in equal parts to the remaining beneficiaries of this section.
Other Facts
The assets of the Foundation are not taxable Australian property.
On the passing of your Parent, the beneficial interest in the Foundation was transferred in accordance with Regulation 2.
When your other parent passed, their beneficial interest in the Foundation transferred to you and your sibling in equal shares.
The Foundation now wishes to distribute the assets and income to you and your sibling.
Relevant legislative provisions
Income Tax Assessment Act 1936 subsection 6(1)
Income Tax Assessment Act 1936 section 99B
Income Tax Assessment Act 1936 section 102AAZD
Income Tax Assessment Act 1997 section 768-910
Income Tax Assessment Act 1997 section 768-915
Income Tax Assessment Act 1997 section 768-970
Income Tax Assessment Act 1997 section 855-10
Income Tax Assessment Act 1997 subsection 995-1(1)