ATO Interpretative Decision

ATO ID 2003/181 (Withdrawn)

Income Tax

• This ATO ID is withdrawn as the issue is now dealt with in Taxation Ruling 2005/8.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Are the salary and wages earned by an Australian resident taxpayer who is an Australian citizen while working for an Australian government authority in Vietnam assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes. The salary and wages earned by an Australian resident taxpayer who is an Australian citizen while working for an Australian government authority in Vietnam are assessable under subsection 6-5(2) of the ITAA 1997.

Facts

The taxpayer is an Australian citizen and is also a resident of Australia for income tax purposes.

The taxpayer is employed by an Australian government authority in Vietnam.

The taxpayer receives salary and wages from the Australian government authority.

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, whether in or out of Australia, during the income year.

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).

Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except in some limited situations).

Schedule 38 of the Agreements Act contains the double tax agreement between Australia and the Socialist Republic of Vietnam (the Vietnamese Agreement). Schedule 38A of the Agreements Act contains the exchange of notes amending the Vietnamese Agreement (Exchange of Notes). The Vietnamese Agreement and the Exchange of Notes operate to avoid the double taxation of income received by Australian and Vietnamese residents.

Paragraph (1) of Article 19 of the Vietnamese Agreement provides that remuneration paid by the Australian government to any individual in respect of services rendered to the Australian government in the discharge of governmental functions will be taxable only in Australia. However, such remuneration will be taxable only in Vietnam if the services are rendered in Vietnam and the individual is a resident of, and a citizen or national of, Vietnam.

As the taxpayer is an Australian citizen and is also resident of Australia for income tax purposes, the salary and wages income earned in Vietnam will not be taxable in Vietnam.

Accordingly, the salary and wages earned by the taxpayer while working for an Australian government authority in Vietnam will be assessable under subsection 6-5(2) of the ITAA 1997.

Year of income:  Year ended 30 June 2002

Legislative References:
Income Tax Assessment Act 1997
   section 6-5
   subsection 6-5(2)

Keywords
Double tax agreements
Foreign income
International tax
Vietnam

Business Line:  Public Groups and International

Date of publication:  28 March 2003

ISSN: 1445-2782