Issue
Whether the income derived by the taxpayer, a non-resident of Australia, from a rental property located in Australia is assessable pursuant to subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997).
Decision
Yes, the taxpayer is assessable on the rental property income under subsection 6-5(3) of the ITAA 1997.
Facts
The taxpayer is a non-resident of Australia for taxation purposes and owns a residential property in Australia from which he derives rental income.
Reasons for Decision
Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that if you are not a resident of Australia for taxation purposes your assessable income includes the ordinary income you derived directly or indirectly from all sources within Australia during the income year.
Income derived from the letting or renting of a residential property is ordinary income, that is, income according to ordinary concepts.
As a non-resident, the taxpayer is therefore assessable on the rental income derived in Australia.
This is also consistent with Australia's Double Tax Agreements with other countries under which income from real property may be taxed in the country in which the property is situated.