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Edited version of your private ruling
Authorisation Number: 1012600872128
Ruling
Subject: Assessability of employment income
Question and answer
Is your Australian sourced employment income assessable income in Australia?
Yes.
This ruling applies for the following periods:
Year ending 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
The scheme commenced on:
1 July 2013
Relevant facts and circumstances
You are a resident of Country X for tax purposes.
You are not a resident of Australia for tax purposes.
You intend to work 8 days per month in Australia.
The contract you have provided states:
• You are the employee.
• Entity Y is the employer.
• You will be employed on an ongoing / permanent basis.
• You will be based in Australia.
• Your wages will be paid fortnightly.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Subsection 6-5(3).
International Tax Agreements Act 1953 Section 4.
Reasons for decision
Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) states:
If you are a foreign resident, your assessable income includes:
a) the ordinary income you derived directly or indirectly from all Australian sources during the income year; and
b) other ordinary income that a provision includes in your assessable income for the income year on some basis other than having an Australian source.
In your case, you are not an Australian resident for tax purposes. You will be earning salary income in Australia while working as an employee Entity Y. As this is Australian-sourced income, it will be assessable income in Australia under subsection 6-5(3) of the ITAA 1997.
However, in determining your liability to pay tax in Australia it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreements.
Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the ITAA 1936 and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 where there are inconsistent provisions (except in some limited situations).
Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The Country X Agreement is listed in section 5 of the Agreements Act.
The Country X agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The Country X agreement operates to avoid the double taxation of income received by residents of Australia and Country X.
Article 14 of the Country X agreement provides that salaries and wages derived by a resident of Country X in respect of an employment shall be taxable only in Country X unless the employment is exercised in Australia. If the employment is exercised in Australia, the remuneration will not be taxed in Australia if all of the following apply:
• the recipient is present in Australia for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the year of income of Australia, and
• the remuneration is paid by, or on behalf of, an employer who is not a resident of Australia, or is borne by or deductible in determining the profits attributable to a permanent establishment which the employer has in Country X, and
• the remuneration is neither borne by nor deductible in determining the profits attributable to a permanent establishment which the employer has in Australia.
In your case, although you will be in Australia for less than 183 days in a twelve month period, as your employer is a resident of Australia as such you do not meet the second two conditions set out above. Therefore, your income is taxable in Australia under the double tax agreement between Australia and Country X.
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