Edited version of private advice

Authorisation Number: 1051854725424

Date of advice: 22 June 2021

Ruling

Subject: Foreign income from rendering services

Question 1

Does Article 19, concerning Government service, of the Convention between Australia and Country X for the Avoidance of Double Taxation with respect to Taxes on Income (the Convention) apply to the income you derived from rendering services to the Institutions in Country X?

Answer

Yes. From the information provided, it is accepted that the Institutions are owned, controlled and funded by the government of Country X so that the services you rendered to the Institutions as a public servant are taken to be services rendered to the government of Country X for the purposes of applying the Convention.

Question 2

Is the income you derived from rendering services to the Institutions in Country X exempt from taxation in Australia under subsection 6-20(2) of the Income tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes. As you derived income in respect of rendering services to the government of Country X, the income is taxable only in Country X under Article 19 of the Convention. The Convention is given the force of law in Australia by the International Tax Agreements Act 1953 which is incorporated with the Income Tax Assessment Act 1936 and the ITAA 1997 so that those Acts are read as one.

Paragraph 106 of Taxation Ruling TR 2002/9 confirms that income that is not taxable in Australia by virtue of one of Australia's double tax agreements/conventions covered by the International Tax Agreements Act 1953 is exempt income under subsection 6-20(2) of the ITAA 1997.

This ruling applies for the following period period:

Year ended 30 June 2020

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You are a national of Country X.

You are a resident of Australia for tax purposes.

You derived income from teaching at two Institutions in Country X.

You were elected as a member of the Faculty and are classified as a public servant.

You are a member of the pension scheme for state personnel.

The Institutions were created by Acts of Parliament.

The government appoints the board of each Institution, elects the Institution council and is responsible for major decisions such as budget approvals.

The Faculty and employees of the Institutions are classified as public servants and belong to the state-owned pension scheme that applies to all government employees.

The budgets of the Institutions form part of the government's budget.

The Institutions depend to a large degree on the budget of the government and are not allowed to create profits as such; only 'savings' as a risk buffer.

You were not paid an hourly or weekly rate, but for a specific teaching outcome, which was completed during the time you spent in Country X.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 subsection 6-20(2)

International Tax Agreements Act 1953