ATO ID 2006/212: Temporary residents of Australia: residency status under the Australia-United Kingdom Double Taxation Convention
Date of decision: 3 August 2006
Year of income: Year ended 30 June 2007
Business line: Public Groups and International

Issue
Is a taxpayer, who is a temporary resident of Australia, a resident of Australia for the purposes of the Australia-United Kingdom Double Taxation Convention (the UK Convention)?

Decision
Yes. A taxpayer, who is a temporary resident of Australia, is a resident of Australia for the purposes of the UK Convention.

Facts
The taxpayer is a resident of Australia for the purposes of Australian tax. The taxpayer is also a 'temporary resident' of Australia as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). The taxpayer derived pension income from the United Kingdom while the taxpayer was a temporary resident of Australia.

Reasons for decision
Summary: Schedule 1 to the International Tax Agreements Act 1953 contains the UK Convention. Article 4(1) of the UK Convention provides that a person is a resident of Australia, for the purposes of this Convention, if the person is a resident of Australia for the purposes of Australian tax. However, Article 4(2) states that a person is not a resident of Australia, for the purposes of the UK Convention, where that person is liable to tax in Australia in respect of income or gains from sources in Australia only. A taxpayer is 'liable to tax' in respect of foreign income or gains, if a provision of Australia's tax laws imposes a liability to tax foreign income or gains of that taxpayer, irrespective of whether that taxpayer actually derives foreign income or gains. Under section 768-910 of the ITAA 1997, not all foreign income derived by a temporary resident is non-assessable non-exempt income. A temporary resident of Australia remains liable to Australian tax on foreign income that is either employment related income or consists of capital gains on shares and rights acquired under employee share schemes. As temporary residents are liable to tax in Australia on certain income and gains from sources outside Australia, Article 4(2) of the UK Convention will not exclude them from being a resident for the purposes of the Convention. As a result, the taxpayer is a resident of Australia for the purposes of the UK Convention.

Legislative references: Income Tax Assessment Act 1997 section 768-910 subsection 995-1(1)
Related public rulings and determinations: Taxation Ruling TR 2005/14 | Taxation Ruling TR 97/19
Subject references: Double tax agreements Foreign pension income International tax Resident/residency Temporary resident United Kingdom