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Edited version of your written advice
Authorisation Number: 1012863951131
Date of advice: 20 August 2015
Ruling
Subject: Locally engaged staff
Question and answer
Is your income derived from work at the overseas Consulate assessable in Australia?
No.
This ruling applies for the following period:
30 June 2016
The scheme commenced on:
1 July 20XX
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 a resident of Australia for taxation purposes.
You are a citizen of Country Y.
You were employed at the overseas Consulate in Australia.
You pay tax on your income in Country Y.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Subsection 6-5(2)
Income Tax Assessment Act 1997 Subsection 52-10(1A)
International Tax Agreements Act 1953 Section 4
International Tax Agreements Act 1953 Schedule 1 Article 19
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 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 Country Y agreement is listed in section 5 of the Agreements Act.
The agreement between Australia and Country Y operates to avoid the double taxation of income received by residents of Australia and country y.
Article XX of Country y agreement considers the tax treatment of Governmental remuneration.
Wages, salaries, and similar remuneration, including pensions, paid from funds of one of the Contracting States, of a state or other political subdivision thereof or of an agency or authority of any of the foregoing for labor or personal services performed as an employee of any of the above in the discharge of governmental functions to a citizen of that State shall be exempt from tax by the other Contracting State.
Consequently your income derived from your work at overseas Consulate will not be taxed in Australia under article XX of the DTA between Australia and Country Y as according to article XX Country Y has the taxing rights as you are a citizen of country Y.