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Edited version of private advice
Authorisation Number: 1052415473257
Date of advice: 1 July 2025
Ruling
Subject:Payment processor
Question
Do you have to pay income tax in Australia on your foreign sourced income that you use an Australian PayPal account as a payment processor?
Answer
No. Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a foreign resident taxpayer includes the ordinary income derived directly or indirectly from all Australian sources, and ordinary income that a provision includes in your assessable income for the income year on some basis other than having an Australian source.
In the 20YY income year, you are a foreign resident and only assessable on the ordinary income derived directly or indirectly from all Australian sources, and ordinary income that a provision includes in your assessable income for the income year on some basis other than having an Australian source.
The source of trading or business profits is generally determined by reference to the place where the trader trades and the place where contracts are agreed is critical: Thorpe Nominees Pty Ltd v FCT 88 ATC 4886. Where it is the case, both are overseas, no income would be assessable under 6-5(3) of ITAA 1997 and should not be included in Australian assessable income.
It is the source of income and where contracts are entered into, which is important, and not the payment processor.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
XX XXXX 20XX
Relevant facts and circumstances
You were born in Country A.
When you were younger your family moved to Australia until you were XX years old, then returned to Country A.
You are a dual national of Australia and Country A.
You have no dependants.
You have siblings who live in Australia.
On XX XXXX 20XX, you opened a PayPal account to use as a freelancer.
The PayPal account doesn't receive interest.
From XX XXXX 20XX to XX XXXX 20XX, you visited Australia to provide familial support to one of your siblings who had just had a baby. On this trip you also, registered as a sole trader in Australia, set up your bank account and a PayPal account for your work.
On XX XXXX 20XX, you applied for an ABN. You registered as an Australian resident. When you received your ABN, you changed your PayPal account to a business account.
Country A doesn't have PayPal services yet and most your clients use PayPal.
In your business, your team members are international.
Your clients are both Australian and international.
In the ruling income year, you and your spouse were residing in Country A.
In the ruling income year, you were a foreign tax resident of Australia.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(3)