Private ruling: International Issues
Date of advice: 27 April 2018
Published: July 2018
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you a temporary resident of Australia for income taxation purposes? | A1: Yes. | Q2: Is your foreign income and capital gains (apart from income from working overseas for short periods) exempt from tax in Australia? | A2: Yes.

Relevant facts and circumstances: You were born in Country A. You are a citizen of Country A and Country B. Your spouse is a citizen of Country A and holds a special category visa, subclass 444. You arrived in Country C in the winter of 20XX. You entered Country C on the special category visa, subclass 444. You are not a Country C resident within the meaning of the Social Security Act 1991. You were employed in Country C. You earned interest from a Country C bank account. You own an investment property in Country B. You also own an investment property in Country A.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 361 | Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 118-12 | Income Tax Assessment Act 1997 Section 768-910 | Income Tax Assessment Act 1997 Section 768-915 | Income Tax Assessment Act 1997 Section 768-960 | Income Tax Assessment Act 1997 Section 885-10 | Income Tax Assessment Act 1997 Section 995-1 | Migration Act 1958 Section 32

Reasons for decision: Summary: From 1 July 2006, temporary residents will not have to pay tax in Australia on most of their foreign income if they: ● are an individual who is a resident of Australia for tax purposes, and ● satisfy the requirements of being a temporary resident. | Detailed Reasoning - Who is a temporary resident?: Under subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997), a taxpayer is a temporary resident if: ● they hold a temporary visa granted under the Migration Act 1958 ● they are not an Australian resident within the meaning of the Social Security Act 1991 , and ● their spouse (if applicable) is not an Australian resident within the meaning of the Social Security Act 1991 . You are a temporary resident because: ● you hold a temporary resident visa subclass 444 (special category visa) granted under the Migration Act 1958 ● you are not an Australian resident within the meaning of the Social Security Act 1991 because you are not a Country C citizen or hold a permanent residency visa, and ● your spouse is a Country A citizen and is a holder of a special category visa, subclass 444 . Section 768-910 of the ITAA 1997 provides that ordinary income derived from a foreign source; excluding employment related income and capital gains on shares and rights acquired under employee share schemes, is exempt from income tax in Australia when derived by a temporary resident of Australia. | Detailed Reasoning - 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. | Detailed Reasoning - 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. | Detailed Reasoning - Consequences of the income being non-assessable non-exempt income: The consequences of your non-employment Country A 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. | Detailed Reasoning - 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 excluded from the controlled foreign company rules.