Private ruling: Residency and assessability of foreign pension
Date of advice: 29 October 2015
Published: October 2015
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: The scheme has commenced

Ruling: Questions and answers: | 1. Are you a resident of Australia for taxation purposes? | Yes. | 2. Are you a temporary resident of Australia for taxation purposes? | Yes. | 3. Are the pensions that you receive from Country T assessable in Australia? | No.

Relevant facts and circumstances: You were born in Country T and are a citizen of the Country T. You and your spouse arrived in Australia on a visitor's visa. You have a child who is a citizen of Australia. You arrived in Australia with the intention to live closer to your child who permanently resides in Australia. Once in Australia, you applied for a permanent resident visa. There is a wait of up to 15 years to obtain a permanent resident visa. In the interim you have been granted a bridging Visa. Holders of a bridging Visa do not meet the Social Security Act definition of an Australia resident. You have not left Australia since your arrival. Since your arrival in Australia you have lived in long term leased accommodation. Your assets in Australia consist of bank accounts, a motor vehicle, household and personal items. Your overseas assets consist of bank accounts. You are in receipt of overseas pensions. Your intention is to reside in Australia permanently.

Relevant legislative provisions: Section 995-1(1) of the Income Tax Assessment Act 1997 | Subsection 6(1) of the Income Tax Assessment Act 1936 | Section 968-90 of the Income Tax Assessment Act 1997 | Subsection 30(2) of the Migration Act 1958 | Subsection 7(2) of the Social Security Act 1991

Reasons for decision: Detailed Reasoning - Residency: 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', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are: • the resides test, • the domicile (and permanent place of abode) test, • the 183 day test, and • the superannuation test. The first two tests are examined in detail in TAXATION RULING NO. IT 2650 INCOME TAX: Residency - Permanent Place Of Abode Outside Australia . The latter two tests are relatively self-explanatory as they require the individual to either be physical present in Australia for a period greater than 183 days or be eligible to contribute to the PSS or CSS superannuation schemes. An individual need only satisfy the conditions of one of the four tests to be deemed a resident of Australia for income tax purposes. | Detailed Reasoning - The resides test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. In Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014) (Dempsey's case) the Administrative Appeals Tribunal noted that the settled position of the courts (at ultimate appellant level) as to the meaning of the word resides in the ITAA 1936 is that the word: bears its ordinary English meaning, which is "to dwell permanently or for a considerable time, to have one's settled or usual abode, to live in or at a particular place". Based on the facts of your case, you are a resident of Australia under the 'resides test' from the date of your arrival. Significant in reaching this conclusion is that since your arrival you have obtained long term accommodation with your spouse and have not left Australia. Further you have purchased a motor vehicle and household items and brought with you to Australia all your personal items. This behaviour is consistent with having a permanent, settled or usual abode in Australia. Therefore consistent with the principles established in Dempsey's case you are a resident of Australia under this test. As it has been determined that you are a resident of Australia under the 'resides test', there is no need to consider the remaining 3 tests. Accordingly, you are a resident of Australia for income tax purposes from the date of your arrival, under subsection 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936. | Detailed Reasoning - Assessable Income: Subsection 6-5(2) of the ITAA 1997 provides that assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Pensions and annuities are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. However where an individual holds the status of a temporary resident of Australia, subdivision 768-R of the ITAA 1997 provides tax relief for most foreign income that is derived. In particular, section 768-910 of the ITAA 1997 provides that ordinary income derived from a foreign source, excluding certain forms of income, is non-assessable non-exempt income when derived by a temporary resident of Australia. | Detailed Reasoning - Temporary resident: Subdivision 768-R of the ITAA 1997 provides that where you meet the requirements of being a temporary resident of Australia you will be subject to the temporary resident rules under section 768-910 of the ITAA 1997. A temporary resident is defined under section 995-1 of the ITAA 1997. Section 995-1 of the ITAA 1997 provides that in order to hold the status of a temporary resident an individual must satisfy all of the following conditions: (a) You hold a temporary visa granted under the Migration Act 1958 (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 . The Social Security Act 1991 defines an 'Australian resident' 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. In your case, both you and your spouse are the holders of a temporary visa whilst your 'Aged Parent Visa 804' is being assessed and neither of you are an Australia resident within the meaning of the Social Security Act. Therefore, as you satisfy the conditions of a temporary resident as defined under subsection 995-1(1) of the ITAA 1997, section 768-910 of the ITAA 1997 will operate to exempt your foreign pension from being taxable in Australia. Accordingly, the pensions that you receive from Country T are not assessable in Australia under section 768-910 of the ITAA 1997.