Private ruling: Temporary resident – Australian sourced income
Date of advice: 10 April 2018
Published: June 2018
Ruling period: Period ending 30 June 2018 | Period Ending 30 June 2019 | Period ending 30 June 2020 | Period ending 30 June 2021 | Period ending 30 June 2022
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you a resident of Australia for Tax purposes? | A1: Yes | Q2: Are you a temporary resident of Australia? | A2: Yes | Q3: Is your Australian sourced income assessable in Australia? | A3: Yes

Relevant facts and circumstances: Your country of origin is country X. You have been issued a visa. This is a temporary visa to September 202X. You intend to reside in Australia with your spouse and two children permanently. You work for a company from country Y that you worked with prior to coming to Australia. You intend to continue to work for this company while you are in Australia. You may be required to lodge income tax returns in country Y while you are living in Australia. You have a home available to you in country X. You have several bank accounts in country Y. Your salary from your employer is deposited in one of your country Y accounts You have leased a home in Australia.

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 6-10(4). | Income Tax Assessment Act 1997 Section 768-910.

Reasons for decision: Detailed Reasoning - Detailed reasoning: To understand your tax situation you first need know if you are an Australian or foreign resident for tax purposes. This may be different to your residency status for other purposes – for example, you could be an Australian resident for tax purposes even if you're not an Australian citizen or permanent resident. Subsection 6-5(2) and subsection 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997) provide that the assessable income of a resident taxpayer includes ordinary income and statutory income derived directly or indirectly from all sources during the income year. However, where an Australian resident is also a temporary resident their foreign sourced income may not need to be included in their assessable income. The terms resident and resident of Australia are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are: ● The resides test ● The domicile test ● The 183 day test ● The Superannuation test The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides. If the primary test is satisfied then the remaining three tests do not need to be considered as residency for Australian tax purposes has already been established. In your case you are an Australian resident for tax purposes as you have been residing at a permanent address for a period of time, your spouse and children live with you in Australia and it is your intention to reside in Australia permanently until your visa end date has been reached. Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) states that you are a temporary resident if: a) You hold a temporary visa granted under the Migration Act 1958; and b) You are not an Australian resident within the meaning of the Social Security Act 1991 ; and c) Your spouse is not an Australian resident within the meaning of the Social Security Act 1991 . You and your spouse are not residents of Australia within the meaning of the Social Security Act 1991 and you hold a temporary visa granted under the Migration Act 1958 . You will remain a temporary resident of Australia unless your status changes in Australia. From 1 July 2006, those taxpayers considered to be temporary residents do not have to pay tax in Australia on most of their foreign income if they: ● are an individual who is an Australian resident for tax purposes, and ● satisfy the requirements of being a temporary resident. Section 768-910 of the Income Tax Assessment Act 1997 (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) and is exempt from income tax in Australia when derived by a temporary resident in Australia. As you are an Australian resident for tax purposes and you: ● have a temporary resident visa: ordinarily most of your foreign income isn't taxed in Australia. But we do tax your income from work that is sourced in Australia while you are a temporary Australian resident ● receive foreign income: this income may be taxed in both Australia and the country from which you received it. If you've paid tax in another country on your foreign income, you may be entitled to an Australian foreign income tax offset ● receive income from a country that Australia has a tax treaty with: you can ask the tax authorities in that country to reduce their withholding tax or to exempt you from paying tax in that country. You can do this by supplying a tax relief form or a certificate of residency or status . Temporary residents of Australia and foreign residents are generally taxed only on their Australian-sourced income, such as money they earn working in Australia. International Source consideration is relevant - this states that the source of a taxpayer’s income (derivation) is the place where the services are performed, and as this is Australia your income is sourced in Australia.