Private ruling: Residency
Date of advice: 2 May 2016
Published: June 2016
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20YY

Ruling: Question and answer | Is your foreign source income derived prior to becoming a resident of Australia assessable in Australia? | No. | Are you entitled to a pro rata tax free threshold for the 20XX income year? | Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are a citizen of Country y. You are a resident of Country y for taxation purposes. You have foreign sourced income in the 20XX income year. You came to Australia on XX XXXX 20XX. You are a resident of Australia for taxation purposes from the date you arrived in Australia.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1). | Income Tax Assessment Act 1936 Subsection 6(1).

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. Where a taxpayer is a resident for only part of the year, their income will be taxed entirely at resident rates. In other words, a person is not required to pay tax at resident and non-resident rates in one income year. As a result, the following will apply to a part-year resident taxpayer: • the foreign source income received by that person during the non-resident period is not assessable in Australia, and • the tax-free threshold will be apportioned based on the number of months in the income year that the person was a resident of Australia for taxation purposes. You were a non-resident of Australia for taxation purposes for a period during the 20XX income year. You are not assessed on your foreign income derived during the period you were a non-resident and you are not required to declare your foreign sourced income in your Australian tax return for that period. You will be a resident of Australia for taxation purposes from XX XXXX 20XX to the end of the 20XX income year. You will receive a pro rata tax free threshold for the period XX XXXX 20XX to 30 June 20XX, which represents the period of time you will be a resident of Australia for taxation purposes in the 20XX income year.