Edited version of private advice

Authorisation Number: 1052394827788

Date of advice: 02 June 2025

Ruling

Subject: Fringe benefits tax

Question 1

Are the salaries, wages and other remuneration of the employees on secondment to Australia taxable in Australia under 'Article 18 Government Services' of the DTA between Australia and Nation A?

Answer 1

No

Question 2

Are non-cash benefits provided to seconded employees subject to Fringe Benefits Tax (FBT)?

Answer 2

No

This ruling applies for the following periods:

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

The scheme commenced on:

1 April 20XX

Relevant facts and circumstances

The Employer is wholly owned, controlled and funded by Nation A.

The Employer's main function is to supply the necessary funds for exploration, etc. for petroleum and combustible natural gas, exploration for coal and geothermal resources and exploration, etc. relating to metallic minerals and conduct such other operations as may be necessary for promoting the development of petroleum and combustible natural gas resources, coal resources, geothermal resources and metallic mineral resources for stockpiling petroleum and metallic and other mineral products.

The Employer's XX branch office carries out the above functions in Australia to further the primary goal of facilitating the maintenance of a stable supply of natural resources to Nation A.

The Employer's XX branch office does not carry on any profit-making activities and nor does it intend to carry on any profit-making activities in the future.

The Employer's secondment of its employees to Australia all exhibit similar characteristics, including the following:

•                all individuals are employees of the Employer and only provide services to the Employer in the course of their employment - they do not render independent personal services to Nation A's Government;

•                all are citizens of Nation A;

•                no such employees are citizens of Australia or permanent residents of Australia and nor do they intend to become citizens of Australia or permanent residents of Australia during their secondment here;

•                all employees hold only Temporary Work (International Relations) visa (subclass 403), being a temporary visa. One of the conditions of this visa is that the person is only allowed to stay in Australia for up to 4 years;

•                all employees are here only by reason of their secondment by the Employer to its XX office and are, or will be, present in Australia only temporarily;

•                at the end of their temporary secondment, all employees relocate overseas (most likely to Nation A);

•                no such employees ever plan to stay in Australia or to take residence here once their duties at the have been completed;

•                all employees seconded to Australia are remunerated only by Nation A's Government, through the Employer; and

•                none of the employees seconded to Australia by the Employer are entitled to parental leave pay.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986, subsection 136(1)

International Tax Agreements Act 1953, section 3AAA

International Tax Agreements Act 1953, section 5

Paid Parental Leave Act 2010

Taxation Administration Act 1953, Schedule 1, subsection 12-1(1)

Taxation Administration Act 1953, Schedule 1, section 12-35

Taxation Administration Act 1953, Schedule 1,section 12-110(1)

Reasons for decision

Article 18(1) of the Double Taxation Agreement between Australia and Nation A (the treaty) provides:

(a)           Salaries, wages, and other similar remuneration paid by a Contracting State or a political subdivision or local authority thereof to an individual in respect of services rendered to that Contracting State or political subdivision or local authority, in the discharge of functions of a governmental nature, shall be taxable only in that Contracting State.

(b)           However, such salaries, wages and other similar remuneration shall be taxable only in the other Contracting State if the services are rendered in that other Contracting State and the individual is a resident of that other Contracting State who:

(i)             is a national of that other Contracting State; or

(ii)            did not become a resident of that other Contracting State solely for the purpose of rendering the services.

Article 18(3) of the treaty provides that Article 18 does not apply to remuneration in respect of services rendered in connection with a business carried on by the Nation A Government.

All employees seconded to Australia are remunerated only by Nation A Government through the Employer. The Employer is an entity, wholly owned, controlled and funded by the Nation A Government. Its main functions are to maintain a stable supply of natural resources to Nation A and to contribute to the development of the oil, natural gas, metals, and minerals industries through its worldwide activities. Employees seconded to the XX branch office of the Employer render services to further these functions. The salary and wage income derived by seconded employees may, therefore, be attributed to services in discharge of governmental functions.

The employees seconded by the Employer to Australia are all Nation A citizens. None of these employees are citizens of Australia, nor do they intend to become citizens of Australia or permanent residents of Australia during their secondment here. Each employee holds a Temporary Work (International Relations) visa (subclass 403) which entitles them to stay in Australia for the duration of four years. All employees are staying in Australia solely for the purpose of rendering services to the Employer. Any remuneration paid by the Employer, therefore, is not assessable income in Australia.

As the Nation A Government does not carry on any profit-making activities through the Employer, nor does it intend to carry on any profit-making activities through the Employer in the future, the seconded employees will not render services in connection with a business carried on by the Nation A Government. Accordingly, Article 18(3) does not apply.

Conclusion

Article 18(1) of the treaty will exempt remuneration paid by the Employer from Australian tax as the seconded employees are rendering services in discharge of governmental functions and the employees are Nation A citizens and did not become Australian residents for a purpose other than to render services to the Employer in Australia.

This ruling will not apply if any employee's circumstances change so that the employee no longer satisfies Article 18(1) of the treaty, or the employee is entitled to 'parental leave pay'.

Question 2

Are non-cash benefits provided by the Employee to seconded employees subject to FBT?

Summary

As discussed in Question One, the Employer employees who are on secondment in Australia are not taxable in Australia under Australian law due to the application of Article 18(1) of the DTA. Therefore, the FBTAA has no application to the employees. Non-cash benefits provided by the Employer to seconded employees will not be subject to FBT.

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