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Edited version of your private ruling
Authorisation Number: 1012235481506
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Ruling
Subject: Withholding for a non-resident working overseas
Questions and answers:
Are you required to withhold taxation under the Pay As You go With Holding System for a non resident employee overseas?
No.
This ruling applies for the following period:
Year ended 30 June 2012.
Year ended 30 June 2013.
The scheme commenced on:
1 July 2011.
Relevant facts:
You are an Australian registered company overseas.
You employ an individual from overseas.
This in individual permanently lives and is a citizen overseas.
This individual is a non-resident.
No work will be performed by this individual in Australia.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Section 6-5 (2)
Income Tax Assessment Act 1997 Section 6-5 (3)
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. However, if you are a foreign resident, your assessable income includes only income derived from an Australian source.
In your case, an employee conducting their work overseas, who is a non-resident is not required to pay taxation in Australia. As such their income is exempt from withholding here in Australia. You are not required to withhold for Australian taxation purposes. You may be required to withhold on behalf of overseas authorities as per local taxation rules.