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Edited version of private ruling
Authorisation Number: 1011736310474
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Ruling
Subject: Assessability of foreign salary
Question:
Is the salary and wages income you receive from an Australian organisation assessable in Australia?
Answer: No.
This ruling applies for the following periods:
Year ending 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
The scheme commenced on:
1 July 2011
Relevant facts and circumstances
You are not a resident of Australia for tax purposes.
You live and work overseas.
You are an ongoing employee of an Australian organisation.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(3).
Income Tax Assessment Act 1997 Subsection 6-10(5).
Income Tax Assessment Act 1997 Subsection 6-20(2).
Taxation Administration Act 1953, Schedule 1, Section 12-1.
Reasons for decision
Assessability of salary and wages
According to subsections 6-5(3) and 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997), if you are a foreign resident, your assessable income includes:
· the ordinary and statutory income you derived directly or indirectly from all Australian sources during the income year; and
· other ordinary or statutory income that a provision includes in your assessable income for the income year on some basis other than having an Australian source.
In your case, you are a foreign resident and you receive ordinary income in the form of salary and wages.
Generally, the source of salary and wages income is the place where the employment activity is undertaken.
The source of your salary and wages income is from overseas where you undertake your employment activities. It is not sourced in Australia.
As you are a foreign resident and the salary and wages income you receive is not sourced from Australia, that income is not included in your Australian assessable income.
PAYG withholding
Where ordinary income is not assessable income to a taxpayer, under subsection 6-20(2) of the ITAA 1997, that income is exempt income. According to section 12-1 of Schedule 1 to the Taxation Administration Act 1953, an employer need not withhold an amount from payment of salary and wages it pays to an individual as an employee where the whole of the payment is exempt income of the employee.
Therefore, as your salary and wages is exempt income, your employer is not required to retain PAYG withholding payments from the payments.