Private ruling: Rental income
Date of advice: 28 July 2017
Published: November 2017
Ruling period: Year ended 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 29 January 2017

Ruling: Questions and answers: | Are you a resident of Australia for income tax purposes? | No. | Are you required to declare your foreign sourced income in your Australian tax return? | No. | Is your Australian sourced rental income assessed at non-resident rates in Australia? | Yes.

Relevant facts and circumstances: You are a citizen of Australia. You were born in Australia. You and your family went to Country Y on in the 2017 income year to live and work. You intend on working in Country Y for more than 2 years. You have an employment visa to enter Country Y which will be renewed throughout the duration of your employment in Country Y. You are employed on a permanent full-time basis by a country Y company and you are liable to pay tax on your wages in Country Y. You are provided with accommodation in Country Y by your employer. Your children are enrolled in school in Country Y. You are renting out your family home in Australia. You have an investment property in addition to the family home in Australia and you have bank accounts in Australia to facilitate the rental properties. You sold all your furniture and household items in Australia. You took some household items and personal items with you to Country Y. Some items were placed into storage in Australia. You have a car and camper trailer in Australia which is being used by friends. You and your family will return to Australia 1-2 times a year for 1-2 weeks each trip. You will stay with relatives when you are in Australia. You will not be in Australia for more than 183 days in any income year. You stated on your outgoing passenger card when leaving Australia that you were migrating permanently to Country Y. You have no social or sporting connections in Australia or Country Y. You and your spouse are not eligible to contribute to the XX or the XY super funds.

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. 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. Based on the facts you have provided, we can conclude that you will not satisfy any of the tests of residency. Accordingly you are not a resident of Australia for income tax purposes under section 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936 for the period you The income you derive in Country Y will be foreign sourced income and not assessable in Australia. The rental income you derive in Australia will be assessable at non-resident rates in Australia.