Private ruling: Temporary resident visa
Published: December 2014
Ruling period: Financial year ended 30 June 2007 | Financial year ended 30 June 2008 | Financial year ended 30 June 2009 | Financial year ended 30 June 2010 | Financial year ended 30 June 2011 | Financial year ended 30 June 2012 | Financial year ended 30 June 2013 | Financial year ended 30 June 2014
Date scheme commenced: 1 July 2006

Ruling: Question and Answer | As a taxpayer present in Australia on a temporary resident visa, are you a temporary resident as defined by subsection 995-1(1) of the income Tax assessment Act 1997 ? | Yes | As a temporary resident are you required to include amounts of income from foreign sources in your Australian assessable income after 1 July 2006? | No | As a temporary resident are you an attributable taxpayer in relation to a controlled foreign company? | No

Relevant facts and circumstances: You and your spouse moved to Australia in 200X. Neither you or your spouse are Australian citizens. You and your spouse remain in Australian under a temporary resident visa. You own more than 10% of shares in a non-resident company. The company has disposed of capital assets since you moved to Australia. The company has derived income since you moved to Australia.

Relevant legislative provisions: Section 361 of the Income Tax Assessment Act 1936 | Section 8-1 of the Income Tax Assessment Act 1997 | Section 118-12 of the Income Tax Assessment Act 1997 | Section 768-910 of the Income Tax Assessment Act 1997 | Section 768-915 of the Income Tax Assessment Act 1997 | Section 768-960 of the Income Tax Assessment Act 1997 | Section 885-10 of the Income Tax Assessment Act 1997 | Section 995-1 of the Income Tax Assessment Act 1997 | Section 32 of the Migration Act 1958 | Reasons for decision | Income derived by a temporary resident | Effective from 1 July 2006, section 768-910 of the ITAA 1997 makes ordinary and statutory income derived by a temporary resident from a source other than an Australian source non-assessable non-exempt income. | Who is a temporary resident? | A temporary resident is a person who satisfies three tests (definition of "temporary resident", s 995-1(1)). The person: | 1. must hold a temporary visa granted under the Migration Act 1958 | 2. must not be an Australian resident within the meaning of the Social Security Act 1991 , and | 3. must not have a spouse who is an Australian resident within the meaning of the Social Security Act 1991 . | This means that a person who is, or whose spouse is, an Australian resident (as defined in the Social Security Act 1991 ) is not entitled to the temporary residents' exemption. In that Act, an Australian resident is defined 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. You hold a temporary visa, you are not an Australian citizen and neither is your spouse. Income of a temporary resident that is made non-assessable non-exempt income | From the 2006/07 income year, amounts are non-assessable non-exempt income if they are: | • ordinary income derived directly or indirectly from a source other than an Australian source by a person who is a temporary resident when the income is derived, or | • statutory income, other than a net capital gain, derived from a source other than an Australian source by a person who is a temporary resident when the income is derived (section 768-910(1)). | Section 768-910(1) has effect subject to section 768-910(3) which provides that some amounts derived by a temporary resident are not non-assessable non-exempt income. These are amounts relating to employment or services performed by the temporary resident (see "Income that is not made non-assessable non-exempt income" below). This does not apply to your non-employment income from a company. | Capital gains and losses of a temporary resident may be disregarded under section 768-915 provided you are a temporary resident when the sale of the assets occurred and you would otherwise not be deemed to have made a capital gain under Division 885 which deals with foreign residents becoming Australian residents. | Consequences of the income being non-assessable non-exempt income | The consequences of your non-employment in the foreign country income being non-assessable non-exempt income are: | • no tax liability arises from the derivation of the income | • outgoings incurred in deriving the income are not deductible (section 8-1(2)(c)) | • capital gains and losses do not generally arise on the disposal of an asset that is used only to produce non-assessable non-exempt income (section 118-12(1)), and | • the income is not counted in reducing prior year losses that can be deducted in the current year or in reducing tax losses carried forward to later years. | Attributable taxpayer in relation to a controlled foreign company | A resident taxpayer who represents a personal interest in a foreign resident company greater than 10% is an attributable taxpayer [section 361 of the Income Tax Assessment Act 1936 ( ITAA 1936)]. You have indicated that your personal interest in the foreign resident company is greater than 10%. As a temporary resident, you are not an attributable taxpayer as temporary residents are excluded from the definition of attributable taxpayer for the income years commencing on or after 1 July 2006 (section 768-960 of the ITAA 1997). Therefore as a temporary resident your interests in the non-resident company are specifically excluded from the controlled foreign company rules.