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Edited version of your written advice
Authorisation Number: 1012729775433
Ruling
Subject: Assessability of income
Question and answer
Is the income you earn in Australia as a locum through short term contracts with locum agencies assessable income in Australia?
No.
This ruling applies for the following periods:
Year ended 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 citizen of Country X and a resident of Country X for taxation purposes.
You undertake short term contract work at various locations throughout Australia.
The contracts you enter are between you and a locum agency.
You have an ABN and are registered for GST. You conduct the work as a contractor. You are not an employee.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Subsection 6-5(3).
International Tax Agreements Act 1953 Section 4.
International Tax Agreements Act 1953 Section 5.
Reasons for decision
Generally speaking, if you are a foreign resident, your assessable income includes the ordinary income you derived directly or indirectly from all Australian sources during the income year, as stated in subsection 6-5(3) of the Income Tax Assessment Act 1997 (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 Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the 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 X of the Country X agreement defines business as including "the performance of professional services and of other activities of an independent character".
Article X of the Country X agreement defines permanent establishment as "a fixed place of business through which the business of the enterprise is wholly or partly carried on".
In regards to business profits, paragraph X of article X of the Country X agreement states:
The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.
In your case, you are a resident of Country X. You work as a locum in Australia for short periods of time in several different locations and you are not an employee. Therefore, your services fall within the definition of 'business'. As you work for short periods in different locations, you did not have a 'permanent establishment' in Australia.
Therefore, under article X of the Country X agreement, your income is only taxable in Country X as you were not carrying on your professional services through a permanent establishment in Australia.
The income you earned while working as a locum in Australia is therefore not assessable income in Australia.
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