Private ruling: Residency
Published: March 2015
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2014

Ruling: Question and answer | 1. Are you a resident of Australia for taxation purposes? | Yes. | 2. Is your foreign pension assessable in Australia? | No.

Relevant facts and circumstances: You were born in and are a citizen of a foreign country. You are a retiree. You do not have a spouse. You do not receive nor are you entitled to receive a social security pension; or any other type of social security payment. You are not an Australian resident within the meaning of the Social Security Act 1991. In 200X you moved to Australia to spend your retirement. You have lived here since then. You have a 410 Temporary Retirement Visa. Since 200X you have been lodging your tax returns in Australia. On your returns you stated that you are an Australian resident.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 6-10 | Income Tax Assessment Act 1997 Section 6-15 | Income Tax Assessment Act 1997 Subdivision 768R | Income Tax Assessment Act 1997 Section 768-910 | Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision: Detailed Reasoning - Assessable income and residency for taxation purposes - general: As a general rule, the assessable income in Australia of an individual who is a resident of Australia for taxation purposes will include all the ordinary and statutory income they earn from all sources, in and out of Australia. Pension income is a form of ordinary income. Although an individual may be a resident of Australia for taxation purposes he or she may also be a temporary resident for taxation purposes at the same time. Where this is the case, the temporary resident provisions of Australia's tax law may operate to exclude certain foreign source income of the individual from being assessable in Australia. | Detailed Reasoning - Residency for taxation purposes: 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 test, • the 183 day test, and • the superannuation test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside' which is not defined in Australian taxation law. In Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014) the Administrative Appeals Tribunal noted that the settled position of the courts (at ultimate appellant level) as to the meaning of the word resides for the purposes of subsection 6(1) of 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 you have provided, we consider you are residing in Australia according to the ordinary meaning of the word and are therefore a resident of Australia for taxation purposes under this test. As a consequence, the remaining tests of residency do not need to be considered in your case. | Detailed Reasoning - Temporary residency for taxation purposes: An individual who is a resident of Australia for taxation purposes will also be considered a temporary resident for taxation purposes if: • they hold a temporary visa granted under the Migration Act 1958 , and • they are not an Australian resident within the meaning of the Social Security Act 1991, and • they do not have a spouse who is an Australian resident within the meaning of the Social Security Act 1991. Based on the facts you have provided you are a temporary resident of Australia for taxation purposes because: • you hold a temporary visa issued under the Migration Act 1958, and • you are not an Australian resident within the meaning of the Social Security Act 1991 , and • you do not have a spouse who is an Australian resident within the meaning of the Social Security Act 1991 | Detailed Reasoning - Temporary residents and assessable income: Subdivision 768-R of the ITAA 1997 provides an exemption for most foreign income derived by individuals who are temporary residents of Australia for taxation purposes. This exemption is explained in part by the following extract from Paragraph 1.23 of the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 : This Bill makes ordinary income derived from a foreign source during the period the taxpayer is a temporary resident non-assessable non-exempt income. This measure also applies to all statutory income that has a source other than Australia……… on which the taxpayer would otherwise be taxed. Income that is non-assessable, non-exempt income is not assessable income under the provisions of subsection 6-15(3) of the ITAA 1997. Section 768-910 of the ITAA 1997 provides that ordinary income (such as pensions) derived by a temporary resident from sources outside Australia are non-assessable, non-exempt income. | Detailed Reasoning - Conclusion: Based on the facts you have provided, you are both a resident and temporary resident of Australia for taxation purposes. Because you are a temporary resident for taxation purposes your assessable income in Australia does not include the pension you receive from the foreign country.