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This edited version has been archived due to the length of time since original publication.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.

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Edited version of your written advice

Authorisation Number: 1012926150714

Date of advice: 18 December 2015

Ruling

Subject: Assessable income

Questions and Answers

This ruling applies for the following periods

Year ended 30 June 20XX

Year ended 30 June 20YY

Year ended 30 June 20ZZ

Year ending 30 December 20ZZ

The scheme commences on

The scheme has commenced

Relevant facts and circumstances

You commenced a X year contract with a foreign country airline.

You are employed as a pilot.

Your employment with the airline is in a foreign country.

You anticipate the airline will be able to offer you reverse scheduling from Australia once you have completed your training requirements.

You will be flying on international routes.

Your initial training takes approximately several months. The majority of this training is ground based in a foreign country.  Of that the last few weeks training is in the aircraft.  It is likely that you will be flying on foreign country domestic routes during those weeks of training only.  After that all flying will be on international routes. You started your training in in late 20XX and have already completed simulator training in a foreign country.  Further simulator testing and training will be completed periodically in a foreign country as part of your ongoing employment.

You will not be re-locating your family to a foreign country nor do you anticipate moving your residence in Australia whether your job is rostered from a foreign country or via possible reverse scheduling within Australia.

You will be taxed in a foreign country on the employment income from the airline.

Relevant legislative provisions

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

International Tax Agreements Act 1953 Section 5

Income Tax Assessment Act 1936

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 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 (DTA).

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 foreign country Agreement is listed in section 5 of the Agreements Act.

The foreign country Agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The foreign country Agreement operates to avoid the double taxation of income received by residents of Australia and a foreign country.

The foreign country Agreement states at Article Q, paragraph 3:

Training period

The income derived from your employment in a foreign country during your training period, was not "derived in respect of an employment exercised aboard a ship or aircraft operated by an enterprise of a contracting state in international traffic" and, consequently, is not exempt from tax in Australia under article Q(3) of the foreign country DTA. It is assessable in Australia as ordinary income under Subsection 6-5(2) of the ITAA 1997.

Flying period

The income derived from your employment in a foreign country during your flying period, is "derived in respect of an employment exercised aboard a ship or aircraft operated by an enterprise of a contracting state in international traffic" and, consequently, is exempt from tax in Australia under article Q(3) of the foreign country DTA. It is not assessable in Australia under Subsection 6-5(2) of the ITAA 1997.

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