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tania_c(Enthusiast)Enthusiast
21 Apr 2021

Hi all,

I am an Australian citizen (Australian born), I have been studing in the US for the last 3 years (student visa) and I intend to return to Australia after finishing my study (in less than 2 years time).

I do not own any property in US, I have been renting during my stay in the US.

I have not earned any income in both US and Australia.

I consider myself as domicile in Australian (please fix if I'm wrong).

My family business is intending to distribute some income from the family trust to me.

Question is: Am I treated as an Australian or foreign residence for tax purposes?

Thank you.

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1,116 views
3 replies

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Most helpful reply

RachATO(Community Support)Community Support
22 Apr 2021

Hi @tania_c,

Your tax residency status is a self-determined assessment, so we aren't able to provide a precise answer in regards to your domicile unfortunately.

You may have seen that we provide the necessary information and tools on our website, and I'll include some links further down, including an online 'questions and answers' determination tool that should take about 5-10 minutes to help form an answer. As for the amount being sent from the family trust, your reporting obligations ultimately depend on your tax residency status, and the intention behind the money being transferred to you (whether it's sent as a loan, a payment that you're entitled to as a beneficiary of the family, or as a genuine gift). Gifts are not considered as assessable income for tax.

For example, if you determine that you're a foreign resident for Australian tax purposes, then you'll only be taxed on your Australian sourced income. So, if the money being issued to you isn't a gift, and the family business/ trust is based overseas, then you wouldn't need to declare it as income on your tax return. However, if the family business/ trust IS in Australia, then you may need to declare it.

Additionally, if you are an Australian tax resident, and the payment isn't a gift, then you may need to declare this amount regardless of where the business/ trust is located in the world.

Note that I use the word 'may' in two scenarios there. The reason being if family trust distribution tax has already been paid, then you wouldn't need to declare the distribution paid to you. This is outlined under 'Income from a trust'.

Hopefully this provides enough information for you, but please reach out if we can help further :)

Links

ATO website- Your tax residency

ATO website- Residency examples

ATO website- Residency and source of income

ATO website- Income from a trust

ATO website- Income you must declare

Forum Post- Tax residency

RachATO

All replies

Most helpful reply

RachATO(Community Support)Community Support
22 Apr 2021

Hi @tania_c,

Your tax residency status is a self-determined assessment, so we aren't able to provide a precise answer in regards to your domicile unfortunately.

You may have seen that we provide the necessary information and tools on our website, and I'll include some links further down, including an online 'questions and answers' determination tool that should take about 5-10 minutes to help form an answer. As for the amount being sent from the family trust, your reporting obligations ultimately depend on your tax residency status, and the intention behind the money being transferred to you (whether it's sent as a loan, a payment that you're entitled to as a beneficiary of the family, or as a genuine gift). Gifts are not considered as assessable income for tax.

For example, if you determine that you're a foreign resident for Australian tax purposes, then you'll only be taxed on your Australian sourced income. So, if the money being issued to you isn't a gift, and the family business/ trust is based overseas, then you wouldn't need to declare it as income on your tax return. However, if the family business/ trust IS in Australia, then you may need to declare it.

Additionally, if you are an Australian tax resident, and the payment isn't a gift, then you may need to declare this amount regardless of where the business/ trust is located in the world.

Note that I use the word 'may' in two scenarios there. The reason being if family trust distribution tax has already been paid, then you wouldn't need to declare the distribution paid to you. This is outlined under 'Income from a trust'.

Hopefully this provides enough information for you, but please reach out if we can help further :)

Links

ATO website- Your tax residency

ATO website- Residency examples

ATO website- Residency and source of income

ATO website- Income from a trust

ATO website- Income you must declare

Forum Post- Tax residency

RachATO

tania_c(Enthusiast)Enthusiast
22 Apr 2021

Hi @RachATO ,

Thank you for your reply.

I have tried to use the ATO tool but results came out as "unable to determine your tax residency status".

Also I forgot to mention that the family business is under Australian family trust.

This residency matter is really confusing, even though the examples provided on the ATO website does cover some scenarios but I couldn't really reflect them to my case.

So to recap:

- I am over 18, have been studying overseas for the last 3 years, been renting overseas and intending to return to Aus once finish my study

- I am still a dependant

- No income in both US and Aus

- Australian family trust wants to distribute some net income to me for tax purposes (not as a gift)

My interpretation is that I will be assessed as Australian residence tax rate, is that correct?

Much appreciate with your help.

KylieATO(Community Support)Community Support
24 Apr 2021

Hi @tania_c,

To get an exact answer to whether you are a resident for tax purposes you would need to contact our Early Engagement team and apply for a private ruling.

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