ATO ID 2003/446: Assessability of salary and wages received by Irish citizen working in Australia
Date of decision: 5 June 2003
Year of income: Year ended 30 June 2003 Year ending 30 June 2004
Business line: Public Groups and International

Issue
Are the salary and wages received from Australia by a taxpayer, who is both a resident of Australia and Ireland for income tax purposes, assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes. The salary and wages received from Australia by a taxpayer, who is both a resident of Australia and Ireland for income tax purposes, are assessable under subsection 6-5(2) of the ITAA 1997.

Facts
The taxpayer is a resident of Australia for income tax purposes. The taxpayer is a citizen of Ireland and also a resident of Ireland for the purposes of Irish tax. The taxpayer is employed in Australia for a continuous period in excess of 6 months by an Australian employer. The taxpayer receives salary and wages from the Australian employer. The taxpayer has a permanent home available in Ireland and has no permanent home available in Australia.

Reasons for decision
Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to tax on Australian sourced income received by the taxpayer, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 20 to the Agreements Act contains the double tax agreement between Australia and Ireland (the Irish Agreement). The Irish Agreement operates to avoid the double taxation of income received by Australian and Irish residents. Article 4 of the Irish Agreement provides the rules where an individual is a resident of Australia and Ireland for tax purposes (the 'tie breaker tests'). The tiebreaker tests ensure that the individual is only treated as a resident of one country for the purposes of applying the Irish Agreement. Article 4(3)(a) of the Irish Agreement provides that a person shall be deemed to be a resident of the country in which the person has a permanent home available. Article 16(1) of the Irish Agreement provides that salary, wages and other similar remuneration derived by a resident of Ireland in respect of employment shall be taxable only in Ireland unless the employment is exercised in Australia. If the employment is exercised in Australia, the income may be taxed in Australia. As the taxpayer has a permanent home in Ireland but not in Australia, the taxpayer will be deemed to be a resident of Ireland under Article 4(3)(a) of the Irish Agreement. Paragraph 66 of Taxation Ruling TR 98/17 states that where the tie breaker tests are used in determining the residence of an individual to a treaty partner country, the terms of the relevant double tax agreement should be referred to in determining the tax liability. TR 98/17 also states that where the tie breaker tests are used in determining the residence of an individual to a treaty partner country, the Australian resident status is not lost for the operation of the ITAA 1997 and the individual continues to be eligible, for example, for the tax-free threshold in respect of the Australian sourced income. Even though the taxpayer is a resident of Ireland under the tie breaker tests, the taxpayer's Australian resident status is not lost for the operation of the ITAA 1997. The salary and wages received by the taxpayer in respect of employment exercised in Australia may be taxed in Australia under Article 16(1) of the Irish Agreement. Accordingly, the salary and wages received from Australia will form part of the assessable income of the taxpayer under subsection 6-5(2) of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 subsection 6-5(2)
Related public rulings and determinations: Taxation Ruling TR 98/17
Subject references: Double tax agreements International Law Ireland Residence in Australia Salary & wages income Treaties