| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011616896595
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: Foreign income - independent contractor
Is the income you receive, under a contractor of service, in a foreign country assessable in Australia under tax treaty between Australia and a foreign country?
Yes.
This ruling applies for the following period
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commenced on
1 July 2010
Relevant facts
You are an Australian resident for income taxation purposes while working in a foreign country.
You departed Australia in late 2010 to work in a foreign country on a three years contract.
You stated that, you are working as an Independent contractor on a roaster of eight weeks on and two weeks off as rest and recreation (R&R) leave.
Your R&R leave will be accrued as a result of your service in foreign country.
You will come back to Australia during your R&R leave.
Your current visa and alien registration card allows you to reside in foreign country for one year at a time with multiple re-entry.
As stated in your contract, a fixed base is regularly available to you in a foreign country for the purpose of performing your duties.
You mentioned that, you do not want income to be assessed under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936).
You are living in an accommodation provided by the contracting company.
You are paying income tax under foreign country tax legislation.
There is a tax treaty between Australia and a foreign country .
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2).
Income Tax Assessment Act 1997 Subsection 770-10(1).
International Tax Agreements Act 1953.
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.
In determine the tax liability, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (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).
The relevant schedule to the Agreements Act contains the tax treaty between Australia and foreign country (the foreign country Convention). The foreign country Convention operates to avoid the double taxation of income received by Australian and foreign country residents.
The relevant article of the foreign country Convention provides that income derived by an Australian resident individual shall be taxable only in Australia unless he has a fixed base regularly available to him in foreign country for the purpose of performing his activity. If he has such a fixed base, the income may be taxed in foreign country but only so much of it as if attributed to activities exercised from that fixed base.
In your case, you are an Australian resident working as an independent contractor in a foreign country. You have a fixed base regularly available to you in a foreign country for the purpose of performing your duties. According to the relevant article of the foreign country Convention, you may be taxed in foreign country but being an Australian resident you will also be taxed in Australia under Australian domestic law.
Therefore, the income you receive from a foreign country is assessable in Australia under subsection 6-5(2) of the ITAA 1997.
Note
Subsection 770-10(1) of the ITAA 1997 entitles you to a tax offset for an income year for foreign income tax. An amount of foreign income tax counts towards the tax offset for the year if you paid it in respect of an amount that is all or part of an amount included in your assessable income for the year. Entitlement to the tax offset arises only when, and to the extent that, the foreign income tax has been paid on an amount included in assessable income.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
