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Edited version of your private ruling
Authorisation Number: 1012411670736
This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
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Ruling
Subject: Foreign income and personal super contributions
Questions and answers:
Can you claim personal super contributions against income whilst working overseas for a foreign company?
No.
Can you claim tax credits for tax paid in country x on your employment income?
Yes.
This ruling applies for the following periods:
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
The scheme commences on:
1 July 2012
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You are an Australian resident.
You have an employment contract in country x which you intend to take up in X.
The income from this employment will be your only income.
Your employer will not be paying you any superannuation.
You would like to make personal contributions to your Australian superannuation fund.
You will not pass the 10% maximum earnings test.
As per your employment contract you will be paying tax on your income in country x.
Relevant legislative provisions
Section 6-5 of the Income Tax Assessment Act 1997
Section 770-11 of the Income Tax Assessment Act 1997
Section 770-75 of the Income Tax Assessment Act 1997
Section 290-160 of the Income Tax Assessment Act 1997
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are an Australian resident for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a non resident of Australia for taxation purposes, your assessable income includes only income from an Australian source.
You are a resident of Australia who will be working overseas for a period of time for a foreign employer. Your employment income will therefore be assessable in Australia as foreign sourced income.
Foreign income tax offset
The foreign income tax offset (FITO) rules are designed to protect taxpayers from double taxation where tax on foreign income is paid at the source and that income is also taxable in Australia. Taxpayers are able to claim an offset for the foreign tax already pain on the income which they need to include in their Australian income tax return.
Section 770-11 of the ITAA 97 states that to qualify for an offset for an income year the taxpayer must have actually paid foreign income tax on the amount that is includes as assessable income in that year, further to this the amount of the offset is limited to the amount of Australian tax that would be payable on the income (as per section 770-75 of the ITAA 97).
Your employment contract states that you will pay tax on your income in country x, so as long as tax is actually paid then you are entitled to a foreign income tax offset.
Personal superannuation contribution deductions
Your overseas employer will not be making any contributions to your superannuation whilst you are working for them. You wish to make personal superannuation contributions and would like to claim a deduction for these contributions.
Taxation Ruling TR 2010/1 Income tax: Superannuation contributions (TR 2010/1) deals with contributions made to superannuation funds and outlines the conditions which must be met for taxpayers to be able to claim deductions for any personal contributions made.
Paragraph 57 of TR 2010/1 states that taxpayers must meet an earnings test to be eligible for a deduction for their personal superannuation contribution. This test is set out in section 290-160 if the ITAA 97 and requires that less than 10% of your total assessable income for the income year must come from the employment you are engaged in as an employee. In your case you are an employee of a foreign company and the income you receive is the only income you will earn for the relevant financial years, therefore you will not meet the 10% test, in addition you have already advised that you will not meet this requirement.
As such you are not entitled to a deduction for any personal superannuation deductions made whilst you are employed overseas in country x.