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Edited version of private ruling

Authorisation Number: 1011601006409

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Ruling

Subject: Foreign income

Is the income you receive, under a consultancy agreement, in country A assessable in Australia?

Yes.

This ruling applies for the following periods

Year ended 30 June 2009

The scheme commenced on

1 July 2008

Relevant facts

You are an Australian resident for tax purposes.

You are a specialist in your field of work.

You were engaged to assist the your employer in country A with the preparation of an audit programme.

You were employed under contract initially for period A.

Further employment with your employer in country A was under verbal agreement

Your employer in country A paid your wages for your work in country A.

Your fee was $ per day plus travel and accommodation expenses.

You were employed for the following periods:

Your employer in country A informed you that you were not liable to tax on your income as you are a non-resident of country A.

You resided in country A for the periods as stamped in your passport.

You did not remain in country A in between these times for personal safety reasons.

There is no tax treaty between Australia and country A.

You were not employed by anyone in Australia while you were working in country A.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 6-5(2)

Income Tax Assessment Act 1997 section 11-15

Income Tax Assessment Act 1997 subsection 6-15(2)

Income Tax Assessment Act 1936 section 23AG

Income Tax Assessment Act 1936 subsection 23AG(1)

Income Tax Assessment Act 1936 subsection 23AG(2)

Income Tax Assessment Act 1936 paragraph 23AG(2)(c)

Income Tax Assessment Act 1936 paragraph 23AG(2)(d)

Income Tax Assessment Act 1936 subsection 23AG(7)

Income Tax Assessment Act 1936 subsection 23AD(1)(a)

Reasons for decision

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (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.

Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.

Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt from income tax it is not included in 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 Income Tax Assessment Act 1936 (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 from foreign service will be exempt from tax in Australia. 'Foreign service' includes service in a foreign country in the capacity as an employee and 'foreign earnings' includes income consisting of salary and wages (subsection 23AG(7) of the ITAA 1936).

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 following reasons:

In your case you were employed for the following periods:

Period A = 31 days

Period B = less than 91 days

Period C = more than 91 days

As you were not engaged in continuous employment for the entire period you do not satisfy the requirement of section 23AG(1) of the ITAA 1936 in having a continuous period of foreign service of not less than 91 days.

For period C you may have had a continuous period of not less than 91 days, however, as your income from Country A was not taxed because you are a non- resident of that country your income is not exempt under section 23AG (2)(d) of the ITAA 1936.

Therefore the salary and wages you received as a contractor based in Country A are assessable under subsection 6-5(2) of the ITAA 1997.

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