ATO Interpretative Decision
ATO ID 2005/160 (Withdrawn)
Income tax
Assessability of employment income received by an Australian academic in IndonesiaFOI status: may be released
-
This ATO ID is withdrawn from the database due to legislative changes to section 23AG of the Income Tax Assessment Act 1936 which took effect from 1 July 2009. Despite its withdrawal, this ATO ID continues to be a precedential view in respect of decisions for income years up to, and including, the 2008-09 income year.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 salary and wages income received by an Australian resident taxpayer from teaching in Indonesia assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. The salary and wages income received by an Australian resident taxpayer from teaching in Indonesia is assessable under subsection 6-5(2) of the ITAA 1997 and is not exempt income under subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936).
Facts
The taxpayer is an Australian resident for income tax purposes.
The taxpayer was employed as a lecturer in Indonesia for approximately 12 months.
The taxpayer receives salary and wages income from an Australian University.
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.
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 23AG of the ITAA 1936, which deals with overseas employment income.
Subsection 23AG(1) of the ITAA 1936 provides that where a resident taxpayer is engaged in foreign service for a continuous period of not less than 91 days, any foreign earnings derived will be exempt from tax in Australia.
Subsection 23AG(7) of the ITAA 1936 defines 'foreign service' as service in a foreign country as the holder of an office or in the capacity of an employee, and 'foreign earnings' include salary, wages, commission, bonuses or allowances.
However, subsection 23AG(2) of the ITAA 1936 provides that the exemption in subsection 23AG(1) of the ITAA 1936 will not apply where the income is exempt from income tax in the foreign country only because of any of the exclusions listed therein.
Under paragraph 23AG(2)(b) of the ITAA 1936, where income is exempt in the foreign country as a result of the operation of a double tax agreement, that income is not exempt under subsection 23AG(1) of the ITAA 1936.
Therefore, 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 1936 and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations).
Schedule 37 to the Agreements Act contains the double tax agreement between Australia and Indonesia (the Indonesian Agreement). The Indonesian Agreement operates to avoid the double taxation of income received by Australian and Indonesian residents.
Article 20 of the Indonesian Agreement provides that remuneration derived by an Australian resident individual who, at the invitation of any university, college, school or other recognised educational institution, visits Indonesia for a period not exceeding two years for the purpose of teaching or research or both at such educational institution, will be taxable only in Australia.
As the salary and wages income received by the taxpayer is exempt from tax in Indonesia pursuant to Article 20 of the Indonesian Agreement, the taxpayer is not entitled to an exemption from tax in Australia under subsection 23AG(1) of the ITAA 1936.
Therefore, the salary and wages income received by the taxpayer from teaching in Indonesia is assessable in Australia under subsection 6-5(2) of the ITAA 1997.
Date of decision: 1 June 2005Year of income: Year ended 30 June 2004 Year ended 30 June 2005
Legislative References:
Income Tax Assessment Act 1936
subsection 23AG(1)
subsection 23AG(2)
paragraph 23AG(2)(b)
subsection 23AG(7)
subsection 6-5(2)
subsection 6-15(2)
section 11-15 International Tax Agreements Act 1953
section 4
Schedule 37
Schedule 37-Article 20(1)
Keywords
Double tax agreements
Exempt income
Foreign salary & wages
Foreign source income
Income
Indonesia
International tax
ISSN: 1445-2782
| Date: | Version: | |
| 1 June 2005 | Original statement | |
| You are here | 11 March 2010 | Archived |