| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012795983927
Ruling
Subject: Foreign source income
Question and Answer
1. Is the income you will derive from your employment in a foreign country flying in international routes assessable in Australia?
No.
This ruling applies for the following periods
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
Year ended 30 June 2018
Year ended 10 January 2019
The scheme commences on
On or after 1 January 2015
Relevant facts and circumstances
You have accepted a contract of employment in a foreign country.
You will be employed as a pilot.
The contract will be for several years.
Your employment will initially be for ground based training.
You will then be flying on international routes.
You will not be relocating your family to a foreign country or anticipating moving from your residence in Australia, whether your job will be in a foreign country or via a reverse scheduling point within Australia.
You will be taxed in a foreign country on the employment income, even if your scheduling involves flights to and from Australia.
Relevant legislative provisions
Taxation Administration Act 1953 Subsection 359-10(3) of Schedule 1
Income Tax Assessment Act 1997 Subsection 6-5(2)
International Tax Agreements Act 1953 Section 5
Income Tax Assessment Act 1936
Reasons for decision
Flying international routes
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 your liability to pay tax in Australia it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreements.
Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations).
Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The foreign country Agreement is listed in section 5 of the Agreements Act.
The foreign country Agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The foreign country Agreement operates to avoid the double taxation of income received by residents of Australia and a foreign country.
The foreign country Agreement states at Article 15, paragraph 3:
Notwithstanding the provisions of paragraphs (1) and (2), remuneration derived in respect of an employment exercise aboard a ship or aircraft operated by an enterprise of a Contracting State in international traffic, shall be taxable only in the Contracting State of which the enterprise is a resident.
In your case, as your employment will be exercised for an enterprise based in a foreign country which will involve flights on international routes, the income will be taxable only in a foreign country and will not, therefore, be assessable in Australia under section Subsection 6(2) of the ITAA 1997.