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Edited version of private ruling
Authorisation Number: 1011762269760
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Ruling
Subject: Foreign income - salary & wages
Question
Is your salary and wages income from research in country X included in your assessable income in Australia?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
The scheme commences on:
1 April 2010
Relevant facts and circumstances
You are a citizen of Australia.
You are an Australian resident for taxation purposes.
You were employed at a University in Australia.
You have been offered a post-doctoral research position in a University of country X, for a period equal to or less than 2 years.
You will be returning to Australia at the completion of the position.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Subsection 6-5(2)
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia.
Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes all the ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (the Agreements Act).
Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one.
A Schedule to the Agreements Act contains the tax treaty between Australia and country X (the country X Convention). The country X Convention operates to avoid the double taxation of income received by Australian and country X residents.
An article of the country X Convention provides that an individual who is a resident of Australia, who visits country X for a period not exceeding two years for the purpose of teaching or carrying out advanced study or research in a country X school, shall be exempt from tax in country X and taxable in Australia for the remuneration they receive from the teaching activities.
In your case, you are a resident of Australia and a teacher. You have been offered a post-doctoral research position in the University of country X. Your employment period will not exceed two years. Therefore, your salary and wages income from your research activities in the University of country X is exempt from tax there and is taxable in Australia pursuant to that article of the country X Convention.
Accordingly, your salary and wages income from research in the University of country X is included in your assessable income in Australia under section 6-5 of the ITAA 1997.