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Edited version of private advice
Authorisation Number: 1052132841515
Date of advice: 5 July 2023
Ruling
Subject: Assessable income
Question
Is the income the taxpayer receives from an Australian company assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No.
This ruling applies for the following period:
Year ended XX/XX/20XX
The scheme commenced on:
XX/XX/20XX
Relevant facts and circumstances
On XX/XX/20XX, you entered an employment contract with the employer. At the time, you were living in Australia.
The employer is based in Australia and you receive remuneration in the form of salary or wages as part of your employment. Your salary or wages are paid in Australian dollars into an Australian bank account.
The employer withholds tax from your salary or wages.
On XX/XX/20XX, you relocated to Country A.
You continued performing your employment for the employer remotely from Country A. At no time during the relevant income year have you performed any part of your employment while physically in Australia.
Your employment has no connection with Country A and the work can be carried out anywhere.
You intend on remaining in Country A permanently.
You are currently a 'foreign resident' for Australian tax purposes.
You are a resident of Country A under the Convention with Country A.
You pay tax on your employment income in Country A.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Reasons for decision
Section 6-5 of the ITAA 1997 operates to make a resident of Australia assessable on their worldwide income, and a non-resident assessable on income, which has, or is deemed to have, its source in Australia.
In determining liability to Australian tax on the basis of residence in Australia it is necessary to consider not only the relevant Income Tax Assessment Act, but also the Convention with Country A.
The Country A convention states the following:
"Subject to the provisions of Articles ... salaries, wages and other similar remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment or in respect of services performed as a director of a company shall be taxable only in that State unless the employment is exercised or the services performed in the other Contracting State. If the employment is so exercised or the services so performed, such remuneration as is derived from that exercise or performance may be taxed in that other State.
The Country A convention is not relevant to your situation as no part of your employment was exercised in Australia.
This means that any payment that you - as a resident of Country A - receive in respect of your employment is taxable only in Country A because the employment is being solely exercised in Country A.
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