Private ruling: International Foreign Income
Date of advice: 1 June 2016
Published: July 2016
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Is the income you are earning from an Australian resident company whilst a resident of Country X assessable in Australia? | A1: No.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are an Australian citizen and you, your spouse and children live permanently in Country X. You became a citizen of Country X in 20XX. Previously you had been a permanent resident. Your spouse is a citizen of Country X and you moved there to be closer to their family. You worked in Country X for a number of years before spending time back in Australia. You and your spouse were residents of Australia for tax purposes during this period and paid tax in Australia accordingly. You and your spouse returned home to Country X in early 20XX where you continued to consult remotely for an Australian resident company. The company you worked for at the time understood that as a resident of Country X and performing your duties physically in Country X, you were no longer subject to taxation in Australia and thus stopped withholding tax. You subsequently provided them with evidence of declaration of that income in Country X. You have just accepted a new role with an Australian resident entity. You are employed directly by the Australian resident entity, who has requested you obtain a private binding ruling. All of the work you will do for them will be executed within your home in Country X. You will receive a remuneration package. You will be paid into an Australian bank account that is registered in your name. You will then transfer money to Country X.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(3)

Reasons for decision: Summary: Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) explains that ordinary income derived by a non-resident directly or indirectly from Australian sources is assessable in Australia. Salary and wages are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. Generally, employment income earned while being carried out overseas is considered to be sourced in that overseas country, unless it is merely incidental to the performance of your duties in Australia. This has been reinforced by Australian courts who have held that the source of employment income is where the employee performs their duties ( C of T (NSW) v. Cam and Sons Ltd (1936) 36 SR (NSW) 544; 4 ATD 32 and FC of T v. French (1957) 98 CLR 398; (1957) 7 AITR 76; 11 ATD 288). In determining the liability to tax on Australian sourced income received by a non-resident, it is necessary to consider not only the Australian income tax laws but also any applicable double tax agreements. There is an international agreement which states that you will be taxed in Country X and not Australia for your remuneration even though your work is provided by an Australian resident entity.