Edited version of private advice

Authorisation Number: 1052281590649

Date of advice: 23 August 2024

Ruling

Subject: Foreign income

Question 1

Are you a temporary resident of Australia pursuant to section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

Based on the facts provided to the Commissioner, you are classified as a temporary resident of Australia for income tax purposes because:

•                you hold a temporary visa issued under the Migration Act 1958, and

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

For more information on temporary residents visit ato.gov.au and search for quick code QC 65131.

Question 2

Will your receipt of a bonus payment received in the 20XX income tax year be apportioned according to source of payment and be considered non-assessable, non-exempt income pursuant to section 768-910 of the ITAA 1997?

Answer

Yes.

Section 768-910 of the ITAA 1997 provides:

(1) The following are non-assessable non-exempt income:

(a) the ordinary income you derive directly or indirectly from a source other than an Australian source if you are a temporary resident when you derive it;

(b) your statutory income (other than a net capital gain) from a source other than an Australian source if you are a temporary resident when you derive it.

The bonus payment you received in X 20XX, resulted from your work conducted over an XX month period. In which you worked in Country A and in Australia for the resident company when you became a temporary resident.

Therefore, only the portion that relates to your employment in the foreign jurisdiction before your arrival date in Australia on XX X 20XX, would be classified as non-assessable non-exempt income pursuant to section 768-910 of the ITAA 1997.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

XX X 20XX

Relevant facts and circumstances

Visa and arrival in Australia

On XX X 20XX, you arrived in Australia on a visa which is valid between the XX X and XX X 20XX.

You and your spouse are Country B citizens. Your spouse is covered as a spouse under your visa.

Country A employment

Company A, your former employer, is a group holding company based in Country A.

On X X 20XX, you signed a full-time employment contract with Company A with the start date listed as X X 20XX.

On XX X 20XX, you were advised of an amendment to the conditions in your original employee contract, which was effective from X X 20XX. You have stated there were no material changes to your position besides an increase in remuneration.

You were not required to travel as part of your role while you were working in Country A.

Between X X 20XX until XX X 20XX, you were employed as a senior accountant.

From X X 20XX until when you left the company on XX X 20XX, you worked as a financial manager.

On XX X 20XX, your employment with Company A, ceased as you were relocating to City A, Australia.

Australian employment contract

On X X 20XX, your employment commenced with a subsidiary of Company A, Company B, which is an Australian based company.

You were employed asthe finance manager for Company B and worked in City A.

Your original hire date with the Company A group of companies was X X 20XX.

On XX X 20XX, you ceased employment with Company B.

Your work on the project

The project started approximately X X 20XX, just before you commenced with the company.

While you did not work on the project full-time in Australia or Country A, you have estimated you spent between XX-XX% of your time working on Project A during your employment at various times throughout the XX month period.

Bonus payment

On the XX X 20XX, you received a letter from the company in relation to the work you had done on the deal. Advising if the sale of the company was finalised, you would be in receipt of a bonus of US$XXXX.

   The terms and conditions of the letter stated:

•                The bonus amount is $XXXX with the following conditions:

o        XX% of the payment described is due upon the close of the successful transaction, you will receive zero payment if no transaction occurs.

o        The payment will be made as soon as administratively possible following a successful transaction.

o        There will be no claw back or future cliff vesting post payment.

On X X 20XX, you received a letter from the company stating:

•                You were awarded a transaction bonus, as all the conditions relating to the sale of the company had been met, which was contingent upon successful completion of the sale of Company A.

•                If you are an employee of Company A and are a tax resident in Australia, the Country C or Country D, you will receive your payment through Company A payroll.

•                Payments would be initiated today and, depending on the jurisdiction, may take up to X business days to clear.

•                Payments will be made in your local currency. The exchange rate from Country D currency will be the spot exchange rate in effect at the time of payment, with no commission or "spread" taken.

•                If you are not a tax resident in those jurisdictions, you will receive funds directly from Company A.

On XX X 20XX, you received US$XXXX (AU$XXXX equivalent) into a non-Australian Bank Account.

On XX X 20XX, the majority of the proceeds were then transferred to your Australian Bank Account.

The large proportion of work that you had done in Country A led to you receiving a letter from the company stating that should the sale go through, you would be in receipt of the bonus.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 768-915

Income Tax Assessment Act 1997 section 995-1