ATO Interpretative Decision
ATO ID 2002/71 (Withdrawn)
Assessability of rental income received from New Zealand - foreign income tax offsets
FOI status: may be released
Status of this decision: Decision withdrawn 23 February 2018.
|CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.|
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Does rental income received from New Zealand form part of an Australian resident taxpayer's assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Yes. As the taxpayer is a resident of Australia, they are required to include the rental income in their assessable income under section 6-5 of the ITAA 1997 but a foreign income tax offset will be available for the foreign tax paid.
The taxpayer is a resident of Australia for taxation purposes, and maintains a rental property in New Zealand.
The taxpayer receives rental income from that property.
Reasons for Decision
Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.
As the taxpayer is a resident of Australia the rental income forms part of their assessable income under section 6-5 of the ITAA 1997.
In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act).
Schedule 4 to the Agreements Act contains the double tax agreement between Australia and New Zealand (the New Zealand Convention). The New Zealand Convention operates to avoid the double taxation of income received by Australian and New Zealand residents.
Article 6 of the New Zealand Convention provides that the New Zealand taxation authorities may tax any rental income that is derived from a rental property situated in New Zealand and paid to a resident of Australia. The New Zealand Convention does not exclude the rental income from being taxable in Australia. The rental income may therefore be taxed in both countries.
Paragraph (1) of Article 23 of the New Zealand Convention provides that, subject to the provisions of the law of Australia, a credit for any tax paid in New Zealand will be allowed against Australian tax payable on income from New Zealand sources.
The New Zealand rental income received by the taxpayer forms part of their assessable income under section 6-5 of the ITAA 1997. If New Zealand tax is paid in relation to this rental income a foreign income tax offset will be allowed.
Date of decision: 28 November 2001
Income Tax Assessment Act 1997
International Tax Agreements Act 1953
Schedule 4, Article 6
Schedule 4, Article 24(2)
Double tax agreements
Double tax relief
foreign income tax offsets
Rental property income
Business Line: Small Business/Individual Taxpayers
Date of publication: 24 January 2002
|ATO ID 2002/71 (Withdrawn) history