Private ruling: Funds held in offshore bank account
Date of advice: 10 October 2016
Published: December 2016
Ruling period: 1 July 2016 to 30 June 2017 | 1 July 2017 to 30 June 2018
Date scheme commenced: 1 July 2016

Ruling: Q1: Will you be assessable in Australia on money you transfer to Australia from an overseas bank account? | A1: No.

Relevant facts and circumstances: You are a citizen of another country. You have been a permanent resident of Australia for many years. You opened a bank account in the other country prior to 20 September 1985. You opened the account in XXXX. The account is an ordinary savings account and has only ever been in your name. You have used the account for private and domestic purposes. You intend to bring some of the balance of the account to Australia.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-10, | Income Tax Assessment Act 1997 Section 10-5, | Income Tax Assessment Act 1997 Parts 3-1 and 3-3, | Income Tax Assessment Act 1997 Section 775-15 and | Income Tax Assessment Act 1997 Section 775-45.

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. | Detailed Reasoning - Statutory income - general: As a general rule, the assessable income of a resident Australian taxpayer includes any amounts of statutory income they receive in an income year from sources in or out of Australia. Amounts are assessable as statutory income if they are made assessable by a specific provision of Australia's tax law. Gains or losses made in relation to a capital gains tax (CGT) asset, as well as foreign exchange (FOREX) gains or losses are types of statutory income that may be included in the assessable income of an Australian resident taxpayer with an offshore bank account. | Detailed Reasoning - Capital gains tax and offshore bank accounts: A bank account denominated in a foreign currency is a CGT asset for the purpose of Australia's tax law. It is the account itself that is the CGT asset, not each separate transaction that may be enacted on the account. The CGT provisions of Australia's tax law only apply to CGT assets that were acquired on or after 20 September 1985. Because you opened your foreign bank account before 20 September 1985 the CGT provisions will not apply to you in respect of that account. Accordingly, no amount related to any withdrawal you make from the account will be assessable in Australia under the CGT provisions. | Detailed Reasoning - Foreign exchange realisation gains and losses: Under the provisions of Division 775 of the ITAA 1997, FOREX gains or losses may be included in the assessable income of an Australian resident taxpayer as a result of a FOREX realisation event happening. The basic rule (in subsection 775-15(1) of the ITAA 1997) is that a taxpayer's assessable income for a year will include a FOREX gain that results from a FOREX realisation event happening during the year. Withdrawing money from a bank account denominated in a foreign currency and converting that money to Australian currency qualifies as a FOREX realisation event. For example, if an individual with an offshore bank account denominated in a foreign currency makes a withdrawal from that account and brings the funds to Australia, FOREX realisation event 2 happens and an assessable FOREX gain or loss may result. There are exceptions to the general rule provided for by subsection 775-15(1) of the ITAA 1997. One of these exceptions applies to accounts held for a purpose that is 'private and domestic' in nature (paragraph 775-15(2)(a) of the ITAA 1997). However, the 'private and domestic' exception cannot be applied if any of the circumstances (Items 1, 2 or 3) in the table in paragraph 775-15(2)(b) of the ITAA 1997 apply. You have advised you opened your offshore account and that it is a normal savings account which you use for private and domestic purposes. Accordingly, and as none of the circumstances in Items 1,2 or 3 in the Table in paragraph 775-15(2)(b) of the ITAA 1997 apply to you, any FOREX gain or loss you make from the withdrawal of funds from the account can be disregarded and excluded from your assessable income in Australia. | Detailed Reasoning - Conclusion: You will not be assessable in Australia on any amount you transfer from your overseas bank account.

Reasons for decision: These reasons for decision accompany the Notice of private ruling .