Edited version of private advice

Authorisation Number: 1051974206913

Date of advice: 20 April 2022

Ruling

Subject: Foreign trust distribution - temporary resident

Question 1

Are you a temporary resident?

Answer

Yes.

Question 2

Are you assessable on distributions of retained or accumulated profits from the foreign Trust to the extent those profits had a foreign source when originally derived by the Trust?

Answer

No.

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 a citizen of country A.

You arrived in Australia with your family on temporary visas.

You have lived in Australia permanently since then.

You are a resident of Australia for income tax purposes.

You and your spouse are currently still on that same visas.

You and your spouse are beneficiaries of a country A trust (Trust).

The Trustee is a country A resident company.

The sole shareholder and Director of the Trustee company is an unrelated individual, who is a country A resident.

The Trustee intends to sell assets of the Trust, then make a distribution to you and your spouse.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 6-10

Income Tax Assessment Act 1997 Section 768-910

Income Tax Assessment Act 1997 Section 995-1

Income Tax Assessment Act 1936 Section 99B

Reasons for decision

Question 1

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) states that you are a temporary resident 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 a person who is living in Australia and is an Australian citizen, a permanent visa holder or a protected special category visa holder.

In your case, you and your spouse are country A citizens, you hold temporary visas. You and your spouse are not Australian residents within the meaning of the Social Security Act 1991.

Therefore, you are a temporary resident.

Question 2

Under section 6-5 and 6-10 of the ITAA 1997, the assessable income of an Australian resident includes ordinary income and statutory income from all sources, whether in or out of Australia.

Section 6-10 of the ITAA 1997 states statutory income is not ordinary income but is included in assessable income by specific provisions in the income tax law.

Section 10-5 of the ITAA 1997 lists certain statutory amounts that form part of assessable income. Included in this list is income derived pursuant to section 99B of the Income Tax Assessment Act 1936 (ITAA 1936).

In your case, the distribution you will receive from the Trust is assessable under 99B of the ITAA 1936, subject to the exclusion contained in subsection 99B(2).

However, section 768-910 of the ITAA 1997 provides that statutory income derived from a foreign source (excluding where the income relates to employment or other services provided by the individual) is non-assessable non-exempt income when derived by a temporary resident of Australia.

Therefore, as you are a temporary resident, the distribution you will receive that is attributable to foreign source income derived by the trust will be non-assessable non-exempt income.