ATO Interpretative Decision
ATO ID 2003/677 (Withdrawn)
Income Tax
Assessability of foreign employment income received by Australian citizen who is not an Australian residentFOI status: may be released
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ATO ID 2003/677 is withdrawn from the database because, following legislative changes which became effective on 14 September 2006, it is no longer current for years of income happening on or after 30 June 2006. Despite its withdrawal from the database, this ATO ID continues to be a precedential view in respect of decisions dealing with the application of paragraph 23(r) of the ITAA 1936 occurring before that date. An ATO ID dealing with the replacement legislation will issue shortly.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
Issue
Are the salary and wages received by a non resident taxpayer, an Australian citizen, from employment in a foreign country assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. The salary and wages income received by the non resident taxpayer, an Australian citizen, from employment in a foreign country are not assessable under subsection 6-5(3) of the ITAA 1997 as they are exempt under paragraph 23(r) of the Income Tax Assessment Act 1936 (ITAA 1936).
Facts
The taxpayer is an Australian citizen and non-resident of Australia for income tax purposes.
The taxpayer commenced employment in a foreign country under a short term contract which later became permanent employment.
The taxpayer intends to remain in the overseas country indefinitely.
The taxpayer receives salary and wages income from the non resident employer.
Reasons for Decision
Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident includes all the ordinary income derived directly or indirectly from all Australian sources during the income year.
Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income.
Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 23(r) of the ITAA 1936 which provides that income derived by a non-resident from sources wholly out of Australia will be exempt from tax.
The source of income derived from employment is generally the place where the duties or services are performed (Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76). Therefore, the salary and wages received by the taxpayer from employment in a foreign country has a foreign source.
The salary and wages derived by the non-resident taxpayer are from sources wholly out of Australia and therefore are exempt from income tax under paragraph 23(r) of the ITAA 1936.
Accordingly, the salary and wages received by the taxpayer are not assessable under subsection 6-5(3) of the ITAA 1997.
Date of decision: 3 July 2003Year of income: Year ended 30 June 2003
Legislative References:
Income Tax Assessment Act 1936
paragraph 23(r)
subsection 6-5(3)
subsection 6-15(2)
section 11-15
Case References:
Federal Commissioner of Taxation v. French
(1957) 98 CLR 398
(1957) 11 ATD 288
(1957) 7 AITR 76
Keywords
Exempt income
Foreign income
Foreign salary & wages
International tax
ISSN: 1445-2782
| Date: | Version: | |
| 3 July 2003 | Original statement | |
| You are here | 1 June 2007 | Archived |