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Edited version of private advice
Authorisation Number: 1051531582612
Date of advice: 24 June 2019
Ruling
Subject: INTL - Foreign Income - DTA
Question
Is the income that you earned from foreign employment assessable in Australia?
Answer
No.
This ruling applies for the following period:
Year ending 30 June 2019
Year ending 30 June 2020
Year ending 30 June 2021
Year ending 30 June 2022
The scheme commences on:
1 July 2018
Relevant facts and circumstances
You are a resident of Australia for taxation purposes.
You are a professional and you work for a Country Y organisation.
Your contract can be extended.
You will keep your main residents in Australia.
You will be taxed in Country Y on the employment income.
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 the People's Republic of China 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 Y Agreement is listed in section 5 of the Agreements Act and is called the Agreement between the Government of Australia and the Country Y for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income Article XX (country Y Agreement).
The country Y Agreement operates to avoid the double taxation of income received by residents of Australia and Country Y.
The Country Y Agreement states at Article XX , paragraph 3:
Notwithstanding the provisions of paragraphs (1) and (2), remuneration derived in respect of an employment exercise aboard a X or X 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.
The income derived from your employment in Country Y employment as a is "derived in is exempt from tax in Australia under article XX of the country Y Agreement. It is not assessable in Australia under Subsection 6-5(2) of the ITAA 1997.