ATO Interpretative Decision

ATO ID 2004/907

Income tax

• This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions.
  Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series. The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953.

Issue

Is the employment income of a dual resident of Australia and Singapore assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997), where the taxpayer is working in Australia for 183 days or less?

Decision

No. The employment income of a dual resident of Australia and Singapore is not assessable under subsection 6-5(2) of the ITAA 1997 where the taxpayer is working in Australia for 183 days or less.

Facts

The taxpayer is a resident of Australia for income tax purposes.

The taxpayer is a citizen of Singapore and also a resident of Singapore for the purposes of Singaporean tax.

The taxpayer is employed by an Information Technology (IT) company resident in Singapore.

The taxpayer receives salary and wages income from their employer to consult on a software development project in Australia for a related Australian company.

The taxpayer does not derive any income in Australia through a permanent establishment (PE).

The taxpayer owns a home in Singapore but does not own a home in Australia.

The taxpayer is present within Australia for a period less than 183 days.

The taxpayer pays tax on the salary and wages income in Singapore.

Reasons for Decision

Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly and indirectly from all sources, whether in or out of Australia, during the income year.

Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.

In determining liability to tax of Australian sourced income received by the taxpayer, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act).

Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one with the Agreements Act. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions).

Schedule 5 to the Agreements Act contains the double tax agreement between Australia and the Republic of Singapore (the Singapore Agreement). Schedule 5A to the Agreements Act contains the protocol amending the Singapore Agreement (the Singapore Protocol). The Singapore Agreement and Singapore Protocol operate to avoid the double taxation of income received by Australian and Singapore residents.

Article 3(2) of the Singapore Agreement provides the rules where an individual is a resident of Australia and Singapore for tax purposes (the 'tie breaker tests'). The tie breaker tests ensure that the individual is only treated as a resident of one country for the purposes of applying the Singapore Agreement.

Article 3(2)(a)(i) provides that an individual shall be treated solely as a resident of Singapore if they have a permanent home available to them in Singapore and do not have a permanent home available to them in Australia. As the taxpayer has a permanent home in Singapore and not in Australia, the taxpayer is considered to be a resident of Singapore under the Singapore Agreement.

Article 12 of the Singapore Agreement provides that remuneration or other income derived by an individual who is a resident of Singapore in respect of personal (including professional) services performed in Australia shall be exempt from tax in Australia if all of the following three conditions are met:

(a)

the recipient is present in Australia for a period not exceeding in the aggregate 183 days in the year of income; and

(b)

the services are performed for on an behalf of a person who is a resident of Singapore; and

(c)

the remuneration is not deductible in determining the Australian assessable income of the Singapore resident's permanent establishment (PE) located in Australia.

Therefore, Article 12 will apply to exempt the income that the taxpayer received while working in Australia because:

(a)

the taxpayer was present in Australia for a period not exceeding 183 days; and

(b)

the services are performed for the taxpayer's Singapore resident employer; and

(c)

the taxpayer does not have a PE in Australia for which the remuneration received is deductible in Australia.

Year of income:  Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1936
   the Act

Related ATO Interpretative Decisions
ATO ID 2003/679

Keywords
Double taxation agreements
Singapore
International tax

Siebel/TDMS Reference Number:  4032885

Business Line:  Public Groups and International

Date of publication:  19 November 2004

ISSN: 1445-2782