Private ruling: Assessability of foreign employment income
Date of advice: 24 November 2016
Published: January 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020
Date scheme commenced: 1 July 2015

Ruling: Question and answer | Is your foreign employment income assessable in Australia? | No.

Relevant facts and circumstances: You are taking up an employment contract with a foreign enterprise. The foreign enterprise is domiciled in country X. Your employment duties will be carried out in international traffic. Your employment income will be subject to tax in country X. You are a resident of Australia for taxation purposes and will remain so during the course of your employment contract.

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

Reasons for decision: Summary: 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. In determining your liability to pay tax in Australia it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreement. Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations). Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The Agreement with country X is listed in section 5 of the Agreements Act. The agreement between Australia and country X operates to avoid the double taxation of income received by residents of Australia and country X. An article of the agreement specifies that remuneration derived in respect of employment exercised aboard a ship or aircraft operated by an enterprise of either country X or Australia in international traffic, will be taxable only in the country of which the enterprise is a resident. In your case, your employment will be exercised in international traffic with an enterprise of country X. Therefore, your employment income will be taxable only in country X and will not be assessable income for Australian income tax purposes.