Edited version of private advice

Authorisation Number: 1052116305407

Date of advice: 1 June 2023

Ruling

Subject: Temporary resident - capital gains and foreign income

Question 1

In relation to the $X,XXX.XX capital gains received from Company A NASDAQ 100 EFT for the year ended 30 June 20XX, does section 768-915 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to disregard all the capital gains given that they are resulted from disposal of non-taxable Australian property (NTAP)?

Answer

Yes.

Question 2

Is the $XX.XX foreign source income received from Company A NASDAQ 100 EFT for the year ended 30 June 20XX, subject to income tax in Australia when considering section 768-R of the ITAA 1997?

Answer

No.

Question 3

In relation to the $XX.XX capital gains received from Company B S&P/ASX 200 ETF for the year ended 30 June 20XX, does section 768-915 of ITAA 1997 apply to disregard all the capital gains given that they are resulted from disposal of NTAP?

Answer

Yes.

Question 4

Is the $X.XX foreign source income received from Company B S&P/ASX 200 ETF for the year ended 30 June 20XX, subject to income tax in Australia when considering section 768-R of the ITAA 1997?

Answer

No.

Question 5

In relation to the $XX.XX capital gains received from Company B world-wide 100 ETF for the year ended 30 June 2022, does section 768-915 of the ITAA 1997 apply to disregard all the capital gains given that they are resulted from disposal of NTAP?

Answer

Yes.

Question 6

Is the $XXX foreign source income received from Company B world-wide 100 ETF for the year ended 30 June 20XX, subject to income tax in Australia when considering section 768-R of the ITAA 1997?

Answer

No.

Question 7

In relation to the $X.XX capital gains received from Company B overseas ETF for the year ended 30 June 20XX, does section 768-915 of the ITAA 1997 apply to disregard all the capital gains given that they are resulted from disposal of NTAP?

Answer

Yes.

Question 8

Is the $XX.XX foreign source income received from Company B overseas ETF for the year ended 30 June 20XX, subject to income tax in Australia when considering section 768-R of the ITAA 1997?

Answer

No.

Question 9

In relation to capital gains arising from disposal of XX company B world-wide Healthcare ETF for the year ended 30 June 20XX, does section 768-915 of the ITAA 1997 apply to disregard all the capital gains given that they are resulted from disposal of NTAP?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You were granted the following visas:

•         student visa - The visa was granted on X XX 20XX. It covers the period from X XX 20XX to XX X 20XX.

•         bridging visa while your business visa application was being processed. The visa was granted on XX X 20XX - This bridging visa did not become active until XX X 20XX when your visa was ended.

You are not married to a Country A resident within the meaning of Social Security Act 1991.

You purchased all the investments during 20XX financial year.

You held the following investments during the 20XX financial year:

•         Company A overseas based ETF

•         Company B overseas based ETF

•         Company B world-wide 100 ETF

•         Company B S&P/ASX 200 ETF

•         Company B world-wide healthcare ETF>

Various distributed capital gains and foreign source income were received form the above investments by yourself for the year ended 30 June 20XX.

During the 20XX income year you received the following from your Company A overseas based ETF:

•         $X,XXX.XX capital gains for the year ended 30 June 20XX.

•         $XX.XX foreign source income for the year ended 30 June 20XX.

During the 20XX income year you received the following from your Company B overseas based ETF:

•         $X.XX capital gains from Company B overseas based ETF for the year ended 30 June 20XX.

During the 20XX income year you received the following from your Company B world-wide 100 ETF:

•         $XX.XX capital gains from Company B world-wide 100 ETF for the year ended 30 June 20XX.

•         $XXX foreign source income from Company B world-wide 100 ETF for the year ended 30 June 20XX.

During the 20XX income year you received Company B S&P/ASX 200 ETF:

•         $XX.XX capital gains from Company B S&P/ASX 200 ETF

•         $X.XX foreign source income from Company B S&P/ASX 200 ETF

During the 20XX income year from Company B overseas ETF:

•         You received $XX foreign source income from Company B overseas ETF.

During the 20XX income year you disposed XX shares in Company B world-wide healthcare ETF.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 768-910

Income Tax Assessment Act 1997 section 768-915

Income Tax Assessment Act 1997 division 855

Income Tax Assessment Act 1997 section 995-1

Income Tax Assessment Act 1997 section 960-195

Reasons for decision

Temporary resident of Australia for tax purposes

An individual is a temporary resident for taxation purposes if:

•         they hold a temporary visa granted under the Migration Act 1958, and

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

•         they do not have a spouse who is an Australian resident within the meaning of the Social Security Act 1991.

The Social Security Act 1991 defines an Australian resident as a person who resides in Australia and is an Australian citizen, the holder of a permanent visa, or a protected special category visa holder who was in Australia on or before 26 February 2001.

Based on the facts you have provided you are a temporary resident of Australia for taxation purposes because:

•         you hold a temporary visa issued under the Migration Act 1958, being Special Category visa (subclass 500, and

•         neither you nor your spouse are Australian residents within the meaning of the Social Security Act 1991.

As a temporary resident of Australia, you generally only need to declare:

•         Income you derived from Australian sources

•         any income you earn from employment or services performed overseas while you are a temporary resident of Australia.

Certain capital gains may also be exempt from Australian tax for temporary residents.

Capital Gains

You were a temporary resident for the year.

Section 768-915 of the Income Tax Assessment Act 1997 (ITAA 1997) states that a capital gain or capital loss you make from a CGT event is disregarded if:

a. you are a temporary resident when the CGT event happens and

b. you would not make a capital gain or loss from the CGT event, or the capital gain or loss from the CGT event would have been disregarded under Division 855, if you were a foreign resident when the CGT event happens.

Division 855 applies to foreign residents to disregard a capital gain or loss from a CGT event if the event happens to an asset that is not taxable Australian property (non-TAP). Taxable Australian property (TAP) can include:

•         taxable Australian real property, such as real property situated in Australia; or

•         indirect Australian real property interest.

•         Shares in a resident company do not satisfy the definition of taxable Australian real property, however they may be an indirect Australian real property interest if the shares pass two tests:

o   the non-portfolio interest test; and

o   the principal asset test.

A membership interest you hold in an entity (the test entity) passes the non-portfolio interest test if the sum of the direct participation interests you and your associates hold in the test entity is 10% or more (section 960-195 of the ITAA 1997).A membership interest you hold in an entity (also the test entity) passes the principle asset test if the total market value of the test entity's assets that are taxable Australian real property (TARP) exceeds the total market value of the test entity's assets that are not TARP (section 855-30 of the ITAA 1997).

Foreign source income

Those taxpayers who are temporary residents do not have 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.

Section 768-910 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that ordinary income and statutory income derived from a foreign source (excluding employment related income and capital gains on shares and rights acquired under employee share schemes) is not assessable in Australia when derived by a temporary resident.

Therefore, when you become an Australian resident for tax purposes and continue to remain a temporary resident, any foreign source dividend income you derive will not be included in your assessable income.