Edited version of private ruling

Authorisation Number: 1011600255359

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Ruling

Subject: Foreign employment income

Question 1

Are you a resident of Australia for income tax purposes for the period of your employment in Country Q?

Answer

Yes.

Question 2

Is your income derived from services with an International organisation (an Organisation) in Country Q assessable in Australia?

Answer

No.

This ruling applies for the following period

Year ended 2010

The scheme commenced on

1 July 2008

Relevant facts

You are a citizen of the Country X.

You have an Australian residency visa.

You left Australia to take up an employment in Country Q and have been working for the Organisation in Country Q for a period of several years.

Your contract is a fixed term appointment and you are subject to the Staff regulations, Staff rules and related administrative issuances, together with amendments as may from time to time be made in the organisation.

Your contract has been extended for a further several months.

You stated there is likelihood for a further extension of this contract, but you will not accept this offer.

You do not need visa to travel to Country Q.

You hold a diplomat passport and you are entitled to diplomatic privileges and immunities assigned under it.

You do not pay any taxes in Country Q because of the privileges and immunities extended to the Organisation, an Agency of the United Nations, by the Country Q Government.

You intend to return to Australia after the completion of your employment contract with the Organisation.

Your spouse accompanied you to Country Q for the duration of your contract and will return back to Australia with you after the completion of your employment in Country Q.

You made and intend to make following trips to Australia during your employment in Country Q:

You used your annual leaves for your visits to Australia that were accrued as a result of your services in Country Q.

You have leased an apartment in Country Q for several years.

You have a joint bank account with your spouse and have a credit card account in Country Q.

You do not have any other assets in Country Q.

You do not have any social and sporting connections in Country Q, except your work colleagues who have become friends in Country Q.

You also own a bank account in Country X.

You own a house in Australia which is rented out since you left Australia.

Your furnishing from your home is currently in storage in Australia.

You have a bank account and home loan account in Australia.

You have friends and family in Australia.

You or your spouse were/are not a member of Commonwealth Superannuation Scheme (CSS) or Public sector Superannuation Scheme (PSS).

Your contract states that the Organisation will reimburse you in accordance with the Staff regulations and the Staff rules from income taxes required to be paid by you on income received form the Organisation pursuant to your appointment.

You do not pay taxes anywhere else.

Australia has a tax treaty with Country Q.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

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

Income Tax Assessment Act 1997 Subsection 6-15(2).

Income Tax Assessment Act 1997 Section 6-20.

International Organisation (Privileges and Immunities) Act 1963

International Atomic Energy Agency (Privileges and Immunities) Regulations 1971-1971 No 30

Regulation 9 of the IAEA (Privileges and Immunities) Regulations

Paragraphs 1,2,3,4,5 of Part 1 of the Fifth Schedule to the IO(P&I)A 1963

Section 6, 2A of Part 1 of the Fifth Schedule of IO(P&I)A 1963

Reasons for decision

Residency

The terms 'resident' and 'resident of Australia', in regard to an individual, are described in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition includes four tests to assist in determining whether you are a resident of Australia for income tax purposes. These tests are:

The resides test

The domicile test

The 183 day test

The superannuation test

The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides.

However, where you do not reside in Australia according to ordinary concepts, you may still be considered to be a resident of Australia for tax purposes if you meet the conditions of one of the other three tests.

The resides test

The ordinary meaning of the word reside, according to the dictionary definition, is to dwell permanently, or for a considerable time, to have ones settled or usual abode, to live in or at a particular place.

As you are residing in Country Q for income year ended 30 June 2010 you are not considered to be residing in Australia during that period.

The domicile test

In order to show that a new domicile of choice in a country outside Australia has been adopted, you must be able to prove an intention to make your home indefinitely in that country.

A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which you intend to live for the rest of your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere.

As there is no evidence of intention to make your home indefinitely outside Australia, you are considered to have maintained your Australian domicile.

Although you have a long term lease for accommodation in Country Q and your spouse accompanied you for the period of your employment in Country Q, your intensions and associations with Australia are considered to be more significant for the following reasons:

You own a house in Australia, which is currently rented out

Your furnishings from your home in Australia is in storage in Australia

You have a bank account and home loan in Australia

You have family and friends in Australia,

You stated there is a likelihood of a further extension of your employment contract but you are not intending to accept it.

You intend to return to Australia after completing your employment contract in Country Q

You have a long term leased apartment in Country Q

Your only asset in Country Q is a bank account

You have a bank account in Country X, which you seldom use

Based on these facts, it is considered that you have not established a permanent place of abode in Country Q. You are therefore considered to be a resident of Australia for tax purposes under the domicile test.

Your residency status

As neither you nor your spouse were/are a member of CSS or PSS schemes and as you are deemed to be a resident of Australia under the domicile test of residency outlined in subsection 6(1) of the ITAA 1936 there is no need to examine the remaining test. Therefore, you remained an Australian resident for taxation purposes during your employment in Country Q for the income years ended 30 June 2010.

Assessability of income

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 during the income year.

However, subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income.

Section 6-20 of the ITAA 1997 provides that an amount of ordinary income is exempt income if it is made exempt from income tax by a provision of the ITAA 1997 or another Commonwealth law.

Income from your employment as Nuclear Engineer to the Organisation are considered ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.

The International Organisation (Privileges and Immunities) Act 1963 (IO(P&I)A) is a Commonwealth Law under which an international organisation, and persons engaged by it, may be accorded certain privileges and immunities including an exemption from tax.

Section 3 of the IO(P&I)A defines an international organisation to which the IO(P&I)A applies to mean an organisation that is declared by the regulations to be an international organisation to which IO(P&I)A applies.

In your case, the relevant international organisation is the Organisation. A Regulations provides that the Organisation is an international organisation to which the IO (P&I) A applies.

Regulation of the Organisation (Privileges and Immunities) Regulations provides that persons whether alone or jointly with other persons serving on committee or participating in work of, or performing mission on behalf of the Organisation has the privileges and immunities specified in paragraphs 1,2,3,4,5, of Part 1 of the Fifth Schedule to the International Organisation (Privileges and Immunities) Act 1963. Section 6, 2A of Part 1 of the Fifth Schedule of the Act provides an exemption from taxation on salaries and emoluments received from the organisation. The term emoluments include payments made to an expert in respect of their services which are remunerations, or at least an advantage obtained as a result of giving those services.

As you are offered a fixed term appointment and are subject to Staff Regulations, Staff Rules and related administrative issuances, it is considered you hold an office in the Organisation, the income that you received is exempt from tax in accordance with the IO(P&I) A and the Regulations relating to the Organisation made under that Act.

Accordingly, as the income is exempt under section 6-20 of the ITAA 1997. As the income you have received from your employment in Country Q is exempt income under section 6-20 of the ITAA 1997, it is not assessable under subsection 6-5(2) of the ITAA 1997.