ATO Interpretative Decision
ATO ID 2003/716 (Withdrawn)
Income Tax
Assessability of remuneration received from the Government of FijiFOI status: may be released
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This ATO ID is withdrawn as the issue is now dealt with in Taxation Ruling 2005/8.This document incorporates revisions made since original publication.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.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Is the remuneration received by a resident taxpayer for services rendered to the government in Fiji assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. Even though the remuneration received by a resident taxpayer for services rendered to the government in Fiji would be assessable under subsection 6-5(2) of the ITAA 1997, Article 19(1) of Schedule 32 to the International Tax Agreements Act 1953 (the Agreements Act) applies and the remuneration is not taxable in Australia.
Facts
The taxpayer is an Australian resident for income tax purposes.
The taxpayer received remuneration from the Fijian Government for services rendered in Fiji.
The taxpayer paid tax on the remuneration in Fiji.
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.
Remuneration for services rendered is ordinary income for the purposes of subsection 6-5(2) 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 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 for some limited provisions).
Schedule 32 to the Agreements Act contains the double tax agreement between Australia and Fiji (the Fijian Agreement). The Fijian Agreement operates to avoid the double taxation of income received by Australian and Fijian residents.
Article 19(1) of the Fijian Agreement provides that remuneration paid by Fiji to any individual in respect of services rendered in the discharge of governmental functions will be taxable only in Fiji. However, the remuneration will be taxable only in Australia if the services are rendered in Australia and the recipient is a resident of and a citizen of Australia.
As the taxpayer rendered services in Fiji, the remuneration received in the discharge of governmental function will be taxable only in Fiji under Article 19(1) of the Fijian Agreement.
Accordingly, the remuneration received by the taxpayer from Fiji will not form part of their assessable income under subsection 6-5(2) of the ITAA 1997.
Date of decision: 31 July 2003Year of income: Year ended 30 June 1999 Year ended 30 June 2000
Legislative References:
Income Tax Assessment Act 1997
subsection 6-5(2)
section 4
Schedule 32
Schedule 32, Article 19(1)
Keywords
Double tax agreements
Exempt income
Fiji
Foreign income
ISSN: 1445-2782
| Date: | Version: | |
| 31 July 2003 | Original statement | |
| You are here | 12 May 2006 | Archived |