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Edited version of private ruling
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Ruling
Subject: Assessability of foreign employment income
Question and answer:
Is the salary you receive from working in Country X assessable income in Australia?
Yes.
This ruling applies for the following periods:
Year ending 30 June 2011
Year ending 30 June 2012
The scheme commenced on:
1 July 2010
Relevant facts and circumstances
You are employed in Country X.
Your employer is an Australian company.
You work in Country X for 6 weeks and then return home to Australia for 2 weeks.
You are a resident and citizen of Australia.
You live in Australia with your spouse.
You pay tax in Country X on your salary and wages income.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2).
International Tax Agreements Act 1953.
Reasons for decision
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.
In your case you are a resident taxpayer and you have received salary and wages income from your employment in Country X.
Australia and Country X have entered into an agreement for the avoidance of double taxation, which is set out in the International Tax Agreements Act 1953.
The Agreement sets out the rules in regards to the taxation of salary and wages, and states that salary and wages derived by an individual who is a resident of Australia in respect of employment shall be taxable only in Australia unless the employment is exercised in Country X, in which case the salary and wages may be taxed in Country X.
In your case you are a resident of Australia and your employment is exercised in Country X.
Therefore, in your case, the salary and wages you earn may be taxed in both Australia and Country X.
You should include the salary and wages income in your Australian income tax returns in the relevant income years. You may therefore also include any work-related deductions you are eligible for in those income tax returns.
As you have also paid tax in Country X, you will be entitled to a foreign income tax offset.