| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1013120562428
Date of advice: 7 November 2016
Ruling
Subject: Foreign Employment Income
Questions and Answers
1. Is the income that you earn from foreign employment as a pilot flying on Country X domestic routes for a Country X airline assessable in Australia?
Yes
2. Is the income that you earn from foreign employment as a pilot flying on international routes with a Country X airline 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 30 June 2019
Year ended 30 June 2020
The scheme commences on
1 July 2014
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 for tax purposes
You entered into a X year contract with a Country X airline.
You are employed as a pilot.
Your employment with Country X airline is based in Country X.
You have a fly-in fly-out arrangement. You spend your period of leave in Australia with your family.
After signing the contract you undertook training in Country X before you could fly with the country X airline, this training included flying domestic routes in Country X.
After the training you have predominately been flying international routes.
You have been required to fly domestic routes in Country X. These routes are not linked to international flights.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
International Tax Agreements Act 1953 Section 4
International Tax Agreements Act 1953 Section 5
Income Tax Assessment Act 1936
Agreement between the Government of Australia and the Government of Country X for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income Article 15
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 (DTA).
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 X Agreement is listed in section 5 of the Agreements Act.
The Country X Agreement operates to avoid the double taxation of income received by residents of Australia and Country X.
Article Y of the Country X agreement provides that salaries, wages and other similar remuneration derived by an individual who is a resident of Australia in respect of employment may be taxed in both Australia and Country X.
Article Y also specifies that in certain circumstances employment income is only taxable in Australia. Because your period in Country X is greater than 183 days and your employer is a resident of Country X, this article does not change the taxing rights.
Article Y also gives Country X sole taxation rights on remuneration derived in respect of an employment exercise aboard an aircraft operated by an enterprise of Country X in international traffic.
Conclusion
● Remuneration derived during the period you were training in Country X is assessable in Australia as ordinary income.
● Remuneration derived in respect of domestic flights within Country X is assessable in Australia as ordinary income.
● Remuneration derived in respect of international flights is exempt from tax in Australia.