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Edited version of your written advice
Authorisation Number: 1013136471989
Date of advice: 6 December 2016
Ruling
Subject: Salary bonus
Question
Is the bonus payment you received in the 201X income year assessable in Australia at non-resident rates?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 201X
The scheme commenced on:
1 July 201X
Relevant facts and circumstances
You came to Australia on a Visa.
You were a resident of Australia for taxation purposes for the period you were working in Australia.
You left Australia permanently in the 201X income year.
You received a bonus payment from your Australian employer in the 201X income year.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Section 6-5.
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) advises that where you are an Australian resident for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a non-resident of Australia for taxation purposes, your assessable income includes only income from an Australian source.
An amount received as a bonus or incentive payment, in relation to services rendered or to be rendered, is treated as salary and wages for tax purposes under section 6-5 of the ITAA 1997. This is because it is received as a consequence of an employment relationship and is therefore assessable in full in the year of receipt.
The bonus payment was derived from employment and constituted income under ordinary concepts. The bonus payment was incidental to your continuing income-earning activity as an employee.
Therefore the bonus payment is ordinary income and is assessable at the time it was received by you in the 201X income year.
Income such as allowances and bonuses are derived for tax purposes at the time such income is paid notwithstanding that the services giving rise to the income may have been performed in a previous income year (Taxation Ruling IT 2534 Income tax: taxation of directors fees, bonuses etc.).
In Federal Commissioner of Taxation v Thorogood (1927) 40 CLR 454 it was stated that "derived is not necessarily actually received, but ordinarily that is the mode of derivation". From that statement there has emerged over the years a principle, applied by Boards of Review on a number of occasions, that an employee is properly assessable upon any amount that is actually received by him in a particular year of income even though some part of it could be said to relate to an earlier year or to a later year of income.
The bonus payment you received while working in Australia was received by you after you had left Australia and became a non-resident for taxation purposes.
As a non- resident of Australia for taxation purposes you are required to declare your Australian derived income in your Australian tax return.
The bonus payment is required to be declared in your Australian tax return in the year you received it and it will be taxed as non-resident rates as you were a non-resident of Australia for taxation purposes when you received the payment in the 201X income year.