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Edited version of your private ruling
Authorisation Number: 1012551960188
Ruling
Subject: Ordinary Income
Question and Answer
Are you assessable on the income derived in Australia from an international company under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Yes.
This ruling applies for the following periods:
Year ended 30 June 2014.
The scheme commences on:
1 July 2013.
Relevant facts and circumstances
· You are an Australian resident.
· You are a dual citizen.
· You have resided overseas for the past several years.
· You provided contracting services to an overseas based company whilst residing overseas.
· You lodged income tax returns overseas for the relative income years whilst working and residing there.
· You have recently returned to Australia from overseas with your family.
· You have purchased a home and now reside in Australia.
· You plan to remain in Australia indefinitely.
· You are still able to continue to provide the same contracting services to the overseas based company whilst now residing in Australia.
· The overseas based company has no association or relationship with any Australian company and has no offices or branches in Australia.
· You entered into a new contract with the overseas based company prior to returning to Australia.
· You will fly overseas approximately 4-5 times during the year to meet and discuss projects with the overseas based company representatives plus other expenses relating to your contracting services.
· You will be paid a monthly consultancy fee in foreign dollars directly into a foreign bank account.
Relevant legislative provisions
Income Tax Assessment Act 1997 (ITAA) section 6-5
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that assessable income of a resident taxpayer includes income according to ordinary concepts, that is, ordinary income derived directly or indirectly from all sources, whether in or out of Australia during the income year.
Ordinary income is generally considered to include:
- amounts received in return for personal services, whether received in the capacity of an employee or otherwise, and
- amounts received periodically or regularly and which the recipient relies on for the maintenance of themselves and/or their dependants (Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540).
The money received from your contracting services has the above characteristics and is regarded as ordinary income.
Therefore, the money received is assessable under section 6-5 of the ITAA 1997.
The phrase `source of income' is not defined in section 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) therefore it is given it its ordinary meaning. This is essentially a practical matter of fact. Nevertheless, over the years, Australian courts have derived some fundamental principles concerning `source of income' according to the nature of particular classes of income. The source of income for wages, salary, or professional fees under a normal contract of employment or contract for services is generally the place where the duties are performed: French v Federal Commissioner of Taxation (1957) 98 CLR 398.
As you are providing contracting services to an overseas based computer/software company whilst residing in Australia the source of your income is considered to be Australia.
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