Private ruling: Assessability of foreign source income
Published: March 2015
Ruling period: 1 July 2014 to 30 June 2015.
Date scheme commenced: The scheme has commenced

Ruling: Question and answer: | Are the allowances paid to you while working as a volunteer overseas assessable in Australia? | No.

Relevant facts and circumstances: You were born in Australia. You have joint citizenship with Australian and Country A. You have lived and worked in the Country A for many years. You recently became a citizen of Country A. Tax is withheld at non-resident rates from interest earned on your Australian bank accounts. You have not lodged a tax return in Australia for several years. You pay tax in Country A. You left the Country A to take up a volunteering assignment in Country B. You will be paid allowances during your volunteering assignment. When your volunteering assignment finishes you could return to live in Australia or Country A, or you might look for work in the region Country B is located and remain in that area for a while. You do not own property in Country A or Australia. When you left Country A you gave up the lease on a flat. If you were to return to Australia you would have to live with your parents until you could find a place to rent. You have personal belongings stored in Australia and in Country A. You have never worked for the Commonwealth Public Service in Australia.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 995-1(1). | Income Tax Assessment Act 1936 Section 6(1). | Income Tax Assessment Act 1997 Section 6-5. | Income Tax Assessment Act 1997 Section 10-5. | Income Tax Assessment Act 1997 Section 15-2.

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an individual who is a resident of Australia for taxation purposes includes all the ordinary and statutory income they earn from all sources in an income year, in or out of Australia. For an individual who is a non-resident of Australia for taxation purposes, the section provides that only the ordinary and statutory income an individual earns from an Australian source is included in their assessable income in Australia. There are therefore three things to be considered when determining whether or not an amount is included in an individual's assessable income in Australia: 1. residency status for taxation purposes, 2. nature of the income, and 3. source of the income. Based on the facts you have provided, you will not be a resident of Australia for taxation purposes between dd/mm/yyyy and 30 June 2015. As such, you would only be assessable in Australia during that time on ordinary or statutory income that is from an Australian source. Section 10-5 of the ITAA 1997 lists the provisions of the tax law that provide for an amount to be statutory income. The list includes section 15-2 of the ITAA 1997 which includes allowances paid to you as a consequence of employment or services rendered. Accordingly, the allowances you will receive during your volunteering assignment qualify as statutory income and would be assessable in Australia if they are from an Australian source. The 'source' of income is generally the place where the services that result in the income are performed (see Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76) where Williams J stated at CLR 414; ATD 296; AITR 85 that: ...the locality of the source of income derived from personal exertion in the capacity of employee or in relation to any services rendered surely must be where such personal exertion took place... The 'source' of your allowances for your volunteering assignment is outside Australia, namely Country B. This is the place you are rendering the services and applying the personal exertion that results in the allowances being paid. | Detailed Reasoning - Conclusion: The allowances you earn from your volunteering assignment will not be assessable in Australia.