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Edited version of your written advice
Authorisation Number: 1013134732609
Date of advice: 1 December 2016
Ruling
Subject: Non-resident income
Question and answer
Is the income you earn in Australia working on projects assessable income in Australia?
Yes.
This ruling applies for the following period:
Year ending 30 June 20YY
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You are a resident of the country A.
You have been working on foreign registered vessels offshore from Australia.
You have worked on various projects:
Project X
Project Y
Project Z
All work was carried out within the Australian Specific Zone
You were employed and paid by Australian companies.
You spent only a few days in Australia (on Australian soil) during 20XX/20YY transiting to and from the vessels.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Subsection 6-5(3).
International Tax Agreements Act 1953 Section 4.
International Tax Agreements Act 1953 Section 5.
Reasons for decision
Generally speaking, if you are a foreign resident, your assessable income includes the ordinary income you derived directly or indirectly from all Australian sources during the income year, as stated in subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997).
However, 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 A Agreement is listed in section 5 of the Agreements Act.
The country A agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The country A agreement operates to avoid the double taxation of income received by residents of Australia and the country A.
Article # of the country A Agreement provides that in respect of salary, wages and other similar remuneration derived by an individual who is a resident of the country A in respect of an employment shall be taxable only in country A unless the employment is exercised in Australia. If the employment is so exercised, such remuneration as is derived from that exercise may be taxed in Australia.
Therefore, under the country A Agreement your income may be taxed in Australia.
You have advised that your jobs were situated in the Australian Specific Zone.
According to the Maritime Boundary Definitions on the Geoscience Australia website, the Specific Zone of Australia has been detailed.
The Australian Specific Zone is defined in the Seas and Submerged Lands Act 1973 ('the SSL Act' - including the amendments to that Act made by the Maritime Legislation Amendment Act 1994).
The outer limit of the Australian Specific Zone is set out in the Proclamation under the SSL Act which was made on 26 July 1994 and published in Gazette S290 on 29 July 1994. That proclamation entered into force on 1 August 1994. The outer boundary is mostly 200M from the territorial sea baselines. However the Proclamation pulls the boundary back to less than 200M in areas of agreed or potential delimitation with other countries. The metes and bounds definitions where the boundary has been pulled back are taken from Australia's maritime delimitation agreements with other countries and, where no such agreement exists, largely follow the Fisheries Management Act 1991 ('the FMA Act') 'excepted waters' Proclamation which was published in Gazette No.S52 of 14 February 1992.
The work you performed on the foreign vessels was carried out in Australia's Specific Zone (which is the equivalent of working in Australia) and you were paid by an Australian company.
In accordance with subsection 6-5(3) of the ITAA 1997 and the country A Agreement, your income is taxable in Australia.
You will need to contact the taxation authorities in country A regarding how to claim what we call a 'foreign tax offset'.