Edited version of your private ruling

Authorisation Number: 1011995706194

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Ruling

Subject: Assessability of foreign sourced income

Question 1

Is your foreign sourced income assessable in Australia?

Answer

No

This ruling applies for the following period

Year ending 30 June 2011

The scheme commenced on

01 July 2010

Relevant facts

You were travelling around another country a few years ago.

You returned to Australia after travelling with the intention of moving back to the other country permanently.

Over a year ago you immigrated to the other country and currently live there. You are therefore a non resident of Australia from this date.

You have a de-facto spouse who has accompanied you to the other country but no children.

You hold an I.D. card from the other country and have entered into a rental agreement fro your accommodation.

You do not own or maintain any residence in Australia.

You blog and write about a range of subjects (travel, education, health etc).

You entered into a contract with a foreign company allowing them to supply and place their advertisements on your websites alongside the articles and blogs that you write and update.

Your websites are a mix of domain names.

The foreign company pays you when visitors click on the foreign company's advertisements.

You are paid on a monthly basis as long as the earnings are more than a specified amount per month.

The foreign company are responsible for the ads which appear on your websites. You only deal with the foreign company and have no connection, relationship or agreement with the businesses in the advertisements.

You have no staff or office in Australia and all the content for the websites is written by you from the other country or outside Australia.

At your request the foreign company has so far been paying your earnings into a personal loan in Australia in Australian dollars. This arrangement saved you having to make overseas transfer each month from the other country to Australia to cover the minimum monthly repayment on the loan. This loan has recently been fully paid and the foreign company will begin to pay your earnings into your bank account in the other country in the currency of the other country.

You and your partner attend religious worship in the other country.

Your partner is attending a language school to learn the language of the other country and you intend to start a more intensive course as you can already converse in the language of the other country.

You and your partner at no time have been employed by the Commonwealth of Australia Government.

Since arriving in the other country, you are subject to the taxation system of the other country which taxes employment income.

You have provided a copy of the contract between yourself and the foreign company.

Relevant legislative provisions

Income Tax Assessment Act 1997

Subsection 6-5(3)

Subsection 6-5(4)

Reasons for decision

Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a foreign resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year and other ordinary income that a provision includes as assessable income on some basis other than having an Australian source.

Your payments from the foreign company are ordinary income under subsection 6-5(3) of the ITAA 1997.

The source of income for services rendered is generally the place where those services are performed. In your case, you have written your ads in the other country and other places outside Australia. Therefore, the source of your income is outside Australia.

Subsection 6-5(4) of the ITAA 1997 provides that a taxpayer is taken to have received, and therefore derived, an amount of ordinary income as soon as it is dealt with on their behalf and as directed by them.

In your case, you are a non resident of Australia who has derived income from sources outside Australia, which you directed towards the payment of a loan taken out in Australia. You are deemed to have earned this income at the time it was dealt with at your direction under subsection 6-5(4) of the ITAA 1997. As this income was derived by a non-resident of Australia from sources outside Australia, it is not assessable income under subsection 6-5(3) of the ITAA 1997.