Private ruling: Residency status
Date of advice: 2 September 2015
Published: September 2015
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Questions and answers: | 1. Are you an Australian resident for taxation purposes? | Yes. | 2. Are your foreign pensions assessable in Australia? | Yes.

Relevant facts and circumstances: You were born in the country T and are a citizen of the country T. On you married an Australian citizen. After your marriage you were awarded a 'Partner (Temporary)(Class country T) Subclass 820 Visa. You are in receipt of two overseas pensions. Both of your pensions are taxed in the country T. Your spouse is an Australian resident within the meaning of the Social Security Act 1991 . In the 2015 income year you and your spouse were present in Australia for the greater part of the year. In the 2016 income year you and your spouse intend to spend X months in country T and Y months in Australia.

Relevant legislative provisions: Subsection 6-5(2) of the Income Tax Assessment Act 1997 | Section 768-910 of the Income Tax Assessment Act 1997 | Section 768-915 of the Income Tax Assessment Act 1997 | Section 995-1 of the Income Tax Assessment Act 1997

Reasons for decision: Summary: 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 to be a temporary resident of Australia you will be subject to the temporary resident rules prescribed 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, as your spouse is an Australian resident within the meaning of the Social Security Act 1991, you do not satisfy all of the conditions to qualify as a temporary resident as defined under subsection 995-1(1) of the ITAA 1997. Therefore, you are not entitled to any of the temporary resident concessions and will be treated as a resident of Australia for tax purposes. Accordingly, the foreign pensions that you are in receipt of are assessable in Australia under subsection 6-5(2) of the ITAA 1997. | Detailed Reasoning - Country T Double Tax agreement (DTA): In determining your liability to pay tax in Australia it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreements. Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the ITAA 1936 and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations). Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The country T Agreement is listed in section 5 of the Agreements Act. The country T agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The country T agreement operates to avoid the double taxation of income received by residents of Australia and the country T. Pensions | Detailed Reasoning - Article 17 Pensions and annuities: Article 17(1) of the country T agreement advises that pensions (including government pensions) and annuities derived by a resident of Australia shall be taxable only in Australia. Therefore provided that you satisfy the requirements of being an Australian resident for tax purposes, the provisions of Article 17(1) of the DTA between Australia and country T apply to make the two pensions that you received from the country T assessable only in Australia. | Detailed Reasoning - Article 4 Residency: Article 4(3a) of the country T agreement advises that where an individual is a resident for tax purposes of both Australia and country T, their status will be determined by which country they have a permanent home available. Where they have a permanent home in both Australia and the country T that individual will be determined to a resident only in the country with which their personal and economic relations are closer. In your case, you have a permanent home available to you in both Australia and the country T. However your personal ties are closer to Australia given that your spouse is a resident of Australia and during the income year both you and your spouse were present in Australia for the greater part of the year. The only economic ties that you have with the country T are two pensions that you are in receipt of. Therefore based on the facts of your case, the provisions of Article 4(3a) of the DTA between Australia and country T apply to make you exclusively a resident of Australia for income tax purposes. | Detailed Reasoning - Conclusion: You are a citizen of the country T and hold a temporary resident visa. Although you hold this visa you do not qualify for temporary resident tax provisions due to your spouse being an Australian resident under the Social Security Act 1991 . Therefore you will be treated as an Australian resident for income tax purposes. As you are an Australian resident for income tax purposes the pensions that you receive from the country T are assessable in Australia. The provisions of Articles 4(3a) and 17(1) of the DTA between Australia and country T apply to make you exclusively a resident of Australia for income tax purposes and the pensions that you receive from country T assessable only in Australia.