Private ruling: Foreign Income
Published: June 2012
Ruling period: Year ending 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you an Australian resident for taxation purposes? | A1: Yes. | Q2: Is the salary you receive from X while on secondment from the Government of Australia in Country X assessable in Australia? | A2: No.

Relevant facts and circumstances: You departed Australia to work in Country X. You have a work visa in Country X. You intend to return to Australia at the end of the contract but you may accept another year extension if offered. You plan to return to Australia in approximately two years.. You have not come back to Australia since first leaving Australia but you intend to come back in for one week. You are living in a rental apartment in Country X. You have an overseas bank account. Your spouse and child remain in Australia. Your spouse and you have a house and an investment property in Australia. Your family has not accompanied you to country X. All of your family live in Australia. You have work colleagues in Country X. You are not a member of CSS or PSS. You are on secondment from the Australian Government Organisation for a fixed term appointment. You will be in receipt of a salary. You have been offered a fixed-term appointment on secondment from the Government of Australia in Country X. Your duties are with Australian Government agency where you report to Higher Headquarters on all matters pertaining to the mission in Country A. The secondment is for two years. You will reside in Country X for the duration of the contract.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1997 subsection 6-5(2) | Income Tax Assessment Act 1997 Subsection 6-15(2) | Income Tax Assessment Act 1997 Section 6-20 | International Organisations (Privileges & Immunities ) Act 1963 Subsection 5(1), | International Organisations (Privileges & Immunities ) Act 1963 Paragraph 3(1)(b) and | International Organisations (Privileges & Immunities ) Act 1963 Subparagraph 6(1)(d)(i).

Reasons for decision: Detailed Reasoning - Residency: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are: · the resides test · the domicile test · the 183 day test · the superannuation test. The first two tests are examined in detail in Taxation Ruling IT 2650. The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides. However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The 'resides' test: The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3 rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'. In your case you have been residing in Country X since 1 July 2011, therefore you are not considered to be residing in Australia under this test. | Detailed Reasoning - The domicile test: If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country. The expression 'place of abode' refers to a person's residence, where they live with their family and sleep at night. In essence, a person's place of abode is that person's dwelling place or the physical surroundings in which a person lives. A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere. In your case, · You have a work visa in Country X · You do not intend to reside overseas permanently · You plan to return to Australia in approximately two years · Your spouse and child remain in Australia · Your spouse and you have a house and an investment property in Australia and · All of your family live in Australia. Based on these facts, there is no evidence of an intention to make your home indefinitely in Country X. The commissioner is satisfied you will maintain your Australian domicile and you have not established a permanent place of abode outside Australia. You will therefore be considered to be a resident of Australia for tax purposes under the domicile test. | Detailed Reasoning - Overseas Income: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident will include ordinary income derived from all sources, whether in or out of Australia, during the income year. Income from your salary and wages is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. However, subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 6-20 of the ITAA 1997 provides that an amount of ordinary income is exempt income if it is made exempt from income tax by a provision of the ITAA 1997 or another Commonwealth law. The International Organisations (Privileges & Immunities ) Act 1963 (IO(P&I)A) is a Commonwealth law under which an international organisation, and persons engaged by it, may be accorded certain privileges and immunities including an exemption from tax. Subsection 5(1) of the IO(P&I)A provides that the regulations may declare an organisation to be an organisation to which this Act applies. Paragraph 3(1)(b) of the IO(P&I)A defines the term an 'international organisation to which this Act applies' to mean an organisation that is declared by the regulations to be an international organisation to which this Act applies. The X is an international organisation listed in the regulations of the IO(P&I)A. Therefore, the X is an international organisation to which IO(P&I)A applies. Subparagraph 6(1)(d)(i) of the IO(P&I)A provides that the regulations may confer all or any of the privileges and immunities set out in Part I of the Fourth Schedule upon a person who holds an office in an international organisation to which this Act applies, not being an office prescribed by the relevant regulations as a high office. In your case, the relevant international organisation is the X. You hold an office with the X as an Officer. Paragraph 2 of Part I of the Fourth Schedule to the IO(P&I)A provides an exemption from taxation on salary and emoluments received from the international organisation. As you are a holder of an office of an international organisation to which the IO(P&I)A applies, the income received by you from working in Country X is exempt from Australian tax in accordance with subparagraph 6(1)(d)(i) the IO(P&I)A and the relevant regulations made under that Act that relate to the organisation. Accordingly, as the income is exempt under section 6-20 of the ITAA 1997 it is not assessable under subsection 6-5(2) of the ITAA 1997.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.