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Edited version of your private ruling
Authorisation Number: 1012483591768
Ruling
Subject: Foreign income
Questions and answers
1. Are you liable for tax in Australia on any of your foreign income which comes from employment paid to you as a visiting academic by your country X employer?
No.
2. Are you liable for tax in Australia on any of your foreign income which comes from rental income on a property you part own in the country X?
No.
3. Are any reimbursements made to you within Australia by your host institution for travel expenses, food, accommodation and incidentals liable for tax?
No.
This ruling applies for the following periods:
Year ending 30 June 2013
Year ending 30 June 2014
Year ending 30 June 2015
The scheme commenced on:
1 July 2012
Relevant facts and circumstances
You are a citizen of country X.
You are a temporary resident.
You are visiting Australia on a visiting academic visa valid for 2 years.
Your visa states that you are not allowed to undertake any paid work while in Australia.
You are an Australian resident for tax purposes.
You became a temporary Australian resident solely for the purposes of performing your services as a visiting academic.
Your spouse and X children reside with you in Australia.
You are employed by a learning institution in Country X and seconded to an Australian learning institution.
You have rented out your residential property and receive rental income.
You may receive small reimbursements for expenses incurred for while undertaking research.
You are renting a home in Australia.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Section 118-110.
Income Tax Assessment Act 1997 Subsection 118-145(2).
Income Tax Assessment Act 1997 Section 118-192.
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, whether in or out of Australia, during the income year.
In determining liability to tax on Australian foreign sourced income received by a resident, 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).
A double tax agreement provides that remuneration paid by the Country X Government or a political subdivision or local authority of that State to any individual in respect of services rendered in the discharge of governmental functions shall be taxable only in country X. However, such remuneration shall be taxable only in Australia if the services are rendered in Australia and the recipient is a resident of Australia who:
· is a citizen of Australia; or
· did not become a resident of Australia solely for the purposes of performing the services.
In your case, you are not a citizen of Australia. You receive the remuneration which is paid by the Government of country X through a learning institution and your services as a visiting academic are considered to be in the performance of governmental functions on behalf of country X. However, as you became a temporary resident of Australia solely for the purposes of performing the services, your salary is taxable only in country X and is not taxable in Australia.
Accordingly, your salary received from country X through the learning institution for services performed in Australia is not assessable under subsection 6-5(2) of the ITAA 1997.
Rental income
Rent is considered as income according to ordinary concepts and is therefore assessable under section 6-5 of the ITAA 1997. It is derived, for tax purposes, when it is received.
Individuals with visas who qualify as "temporary residents' are not assessable on most of their foreign sourced income, even if they qualify as residents under normal tax rules.
Foreign soured income derived by a temporary resident will be exempt under section 768-910 of the ITAA97. In your case the income you derive from your rental property is non-assessable non-exempt income
Reimbursements
Broadly, the definition of a fringe benefit in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides that a fringe benefit arises when:
(i) a benefit
(ii) is provided to an employee, or an associate of an employee
(iii) by the employer, an associate of the employer, or a third party under an arrangement involving either the employer, or an associate of the employer
(iv) in respect of the employment of the employee
(v) if the benefit is not one of the benefits listed in paragraphs (f) to (s) of the fringe benefit definition.
Reimbursements are a FBT, a fringe benefit is taxable in both Australia and country X the benefit will be taxable only in the country which would have the primary taxing right over that benefit if the value of the benefit were paid to the employee as ordinary employment income.
In your case country X has your primary taxing right over that benefit, therefore, the reimbursements for travel expenses, food, accommodation and incidentals are not taxable in Australia.