Private ruling: Locally engaged staff member income
Date of advice: 15 June 2017
Published: October 2017
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2015

Ruling: Q1: Is the income you earn as a Locally Engaged Staff (LES) member at Country X Consulate assessable income in Australia? | A1: Yes.

Relevant facts and circumstances: You are a citizen of Country X. You are a resident of Australia for tax purposes. You are not a resident of Country X for tax purposes. You moved to Australia and have resided in Australia in since 201X, becoming an Australian citizen in 201X. You were hired by the X Consulate General in late 201X as a LES member. You are not a diplomat or a Foreign Service officer. You maintain your permanent home in Australia.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5(2) | International Tax Agreements Act 1953 | Income Tax Assessment Act 1936

Reasons for decision: Detailed Reasoning - Locally Engaged Staff member income: 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 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 Australian tax on foreign sourced income received by an Australian resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement enforceable under the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Australian Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that Acts are read as one. In the event of inconsistent provisions, the Agreements Act overrides the ITAA 1936 and ITAA 1997 except in some limited situations. An agreement between Country X and Australia operates to avoid the double taxation of income. An article of the agreement provides that for the purposes of this agreement a person is a resident of Australia if the person, under the law of Australia relating to Australia tax, is a resident of Australia. In your case, you are a tax resident of Australia under the law of Australia relating to Australia tax. Various articles in the agreement operate to make your salary assessable in both countries and to provide for Country X to allow a tax credit for the tax paid in Australia on your salary.