Edited version of private advice

Authorisation Number: 1052417070994

Date of advice: 3 July 2025

Ruling

Subject: Residency - Foreign rental income

Question 1

Are you a resident of Australia for tax purposes from XX 20XX?

Answer

Yes.

Question 2

Is your rental income from Country X assessable in Australia under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

Question 3

Is your Country X pension income assessable in Australia under subsection 6-5(2) of the ITAA 1997?

Answer

Yes.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

XX 20XX

Relevant facts and circumstances

You were born in Country X.

You migrated to Australia with your spouse in XXXX and acquired Australian citizenship in XXXX.

You lived in Australia for XX years before relocating to Country X in XXXX due to family circumstances.

On XX 20XX, you decided to reside in Australia permanently with your spouse to support your child who was diagnosed with a serious medical condition requiring ongoing care.

On XX 20XX, you went back to Country X for X months to take care of your properties in Country X.

On XX 20XX, you arrived back in Australia.

On XX 20XX, you and your spouse travelled back to Country X to sell one of your properties. You intend to return Australia in XX 20XX.

Since you moved to Australia, your mail is generally directed to Australia.

In Australia, you and your spouse rent accommodation which you share with your child. The rental agreement is for X years.

You hold a bank account with Australian commercial bank. You also own a motor vehicle.

In Country X, you own 50% share ownership of two properties. You are managing the rental by yourself and you have the intention to sell one of the properties.

You declared your rental income in Country X until XX 20XX. You also receive Country X pension income

Your household effects in Country X are minor in value and kept in one of the properties.

The number of days you leave in Australia in 20XX income year is more than 183 days.

You and your spouse are not members of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) or a spouse of such a person.

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 995-1(1)

Reasons for decision

Question 1

Are you a resident of Australia for tax purposes from XX 20XX?

Detailed reasoning

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms 'resident' and 'resident of Australia', as applied to an individual, are defined in subsection 6(1) of the ITAA 1936.

The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are:

•                     the resides test (also referred to as the ordinary concepts test)

•                     the domicile test

•                     the 183-day test, and

•                     the Commonwealth superannuation fund test.

The resides test is the primary test for deciding the residency status of an individual. This test considers whether an individual resides in Australia according to the ordinary meaning of the word 'resides'.

Where an individual does not reside in Australia according to ordinary concepts, they will still be an Australian resident if they meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund test).

Our interpretation of the law in respect of residency is set out in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals.

We have considered the statutory tests listed above in relation to your situation as follows:

The resides test

The ordinary meaning of the word 'reside' has been expressed as 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place': See Commissioner of Taxation v Miller (1946) 73 CLR 93 at 99 per Latham CJ, citing Viscount Cave LC in Levene v Inland Revenue Commissioners [1928] AC 217 at 222, citing the Oxford English Dictionary. Likewise, the Macquarie Dictionary defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

The Commissioner considers the following factors in relation to whether a taxpayer is a resident under the 'resides' test:

•                     period of physical presence in Australia

•                     intention or purpose of presence

•                     behaviour while in Australia

•                     family and business/employment ties

•                     maintenance and location of assets

•                     social and living arrangements.

It is important to note that no one single factor is decisive, and the weight given to each factor depends on each individual's circumstances.

Because the resides test is about whether an individual resides in Australia, the factors focus on the individual's connection to Australia. Having a connection with another country, or being a resident of another country, does not diminish any connection to Australia. The ordinary meaning of reside does not require an individual to have a principle or usual place of residence in Australia.

Application to your situation

You are a resident of Australia under the resides test from XX 20XX based on the following:

•                     Your intention is to relocate to Australia permanently with your spouse to support your child.

•                     You were physically present in Australia from XX 20XX to XX 20XX. You will return to Australia after a temporary period back in Country X.

•                     You have leased accommodation in Australia.

Although the law only requires you to be considered a resident under one test, for completeness we will also consider the 183-day test.

183-day test

Where a person is present in Australia for 183 days or more during the year of income the person will be a resident, unless the Commissioner is satisfied that both:

•                     the person's usual place of abode is outside Australia, and

•                     the person does not intend to take up residence in Australia.

Application to your situation

You have been in Australia for more than 183 days in the 20XX-20XX income year. Therefore, you will be a resident under this test unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not have an intention to take up residence in Australia.

The Commissioner is not satisfied that your usual place of abode was outside Australia for the relevant income year and is also not satisfied that you do not intend to take up residence in Australia.

This is because your intention is to relocate to Australia permanently with your spouse and you have leased accommodation in Australia.

Therefore, you are a resident for tax purposes under the 183-day test.

Conclusion

You satisfy the resides and 183-day tests of residency and so are a resident of Australia for tax purposes from XX 20XX.

Question 2

Is your rental income from Country XX assessable in Australia under subsection 6-5(2) of ITAA 1997?

Detailed reasoning

Subsection 6-5(2) of the ITAA 1997 states that if you are an Australian resident, your assessable income includes the ordinary income you derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

Application to your situation

You are Australian resident for tax purpose from XX 20XX. Therefore, from XX 20XX you will need to declare your worldwide income you receive that includes your rental income from the properties in Country X. You may be entitled for foreign income tax offset (FITO) for the tax that you paid in Country X until XX 20XX.

Question 3

Is your Country X pension income assessable in Australia under subsection 6-5(2) of ITAA 1997?

Detailed reasoning

As an Australian resident for tax purposes, you are taxed on your worldwide income, so you must declare any foreign income in your income tax return, including your foreign pension.

The Agreement between Australia and Country X for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (DTA) applies to persons who are a resident of one or both of the Contracting States.

Article 18 of the DTA provides pensions (including government pensions) and annuities paid to resident of one of the Contracting States will be taxable only in that State.

Application to your situation

In your case, you are Australian resident for tax purposes from XX 20XX and you receive pension income from Country X. Therefore, you will need to declare your Country X pension income in your Australian income tax return.

You may be able to make arrangements to not have tax withheld from future pension payments from Country X. You can do this by contacting your payer or supplying a tax relief form or a certificate of Australian residency or status.