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Edited version of your written advice
Authorisation Number: 1051273843996
Date of advice: 25 August 2017
Ruling
Subject: Foreign income
Question and answer
Is the income you are earning from a Government Agency whilst a resident of Country Y assessable in Australia?
No.
This ruling applies for the following period(s)
Year ending 30 June 2018
The scheme commences on
1 July 2017
Relevant facts and circumstances
You are an Australian citizen and you, your spouse and children live permanently in Country Y.
You became a citizen of Country Y a number of years ago. Until then you had been a permanent resident of Country y for a number of years prior.
You work for an Australian Government agency.
You are employed directly by the Government Agency, whom have requested you obtain a private binding ruling.
All of the work you will do for them will be executed within your home in Country Y.
Your remuneration from the Government Agency will be A$XXX ,000 per annum plus equivalent superannuation amounts.
You will work a total of XX hours per week.
You will be paid into an Australian bank account that is registered in your name. You will then transfer money to Country Y.
You own an investment property in Australia.
Your parents and siblings reside in Australia.
You, your spouse and your children visit Australia annually.
Your X children are all Australian citizens; Y of them were born in Australia.
You lodge a tax return annually in Australia for the purpose of reporting revenue on your rental property
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(3)
Convention between Australia and Country Y for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income [No. 14 1981] Article 19
Reasons for decision
These reasons for decision accompany the Notice of private ruling.
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) explains that ordinary income derived by a non-resident directly or indirectly from Australian sources is assessable in Australia.
Salary and wages are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997.
Generally, employment income earned while being carried out overseas is considered to be sourced in that overseas country, unless it is merely incidental to the performance of your duties in Australia. This has been reinforced by Australian courts who have held that the source of employment income is where the employee performs their duties (C of T (NSW) v. Cam and Sons Ltd (1936) 36 SR (NSW) 544; 4 ATD 32 and FC of T v. French (1957) 98 CLR 398; (1957) 7 AITR 76; 11 ATD 288).
In determining the liability to tax on Australian sourced income received by a non-resident, it is necessary to consider not only the Australian 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 overrules 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 Convention between Australia and Country Y for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income is listed in section 5 of the Agreements Act.
Article XX of the agreement between Australia and Country Y (the Agreement) states, in effect, that remuneration, other than a pension or annuity, in respect of services rendered to a government (including a political subdivision or local authority) of Australia will be taxed only by Australia.
There is an exception where the remuneration is paid in respect of services rendered in Country Y and the recipient is, in broad terms, a citizen of, or ordinarily resident in Country Y. In that case the remuneration will be taxed only by Country Y.
Your income derived from your work with the government Agency is not assessable in Australia.
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