Private ruling: Assessability of income
Date of advice: 5 August 2016
Published: September 2016
Ruling period: Year ended 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2015

Ruling: Question and answer | Is the portion of your income derived in Australia assessable in Australia? | Yes.

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 a resident of Country Y for taxation purposes. You are a citizen of Country Y. You work for an Australian company. You carry out 90% of your duties in Country Y and 10% in Australia. The company does not have a permanent establishment in Country Y. You are in Australia for less than 183 days. Your salary and superannuation is deductable in determining the profits of the Australian company.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2) | Income Tax Assessment Act 1997 Subsection 52-10(1A) | International Tax Agreements Act 1953 Section 4 | International Tax Agreements Act 1953 Schedule 1 Article 14

Reasons for decision: Summary: 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, whether in or out of Australia, during the income year. Salary and wages is ordinary income assessable under subsection 6-5(2) of the ITAA 1997. 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 agreements. 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 Country Y Agreement (Country Y agreement) is listed in section 5 of the Agreements Act. The agreement between Australia and Country Y operates to avoid the double taxation of income received by residents of Australia and Country Y. Article XX of the Country Y agreement considers the tax treatment of income from employment. It states: 1. Subject to the provisions of Articles A, B and C, salaries, wages and other similar remuneration derived by a resident of Country Y in respect of an employment shall be taxable only in Country Y unless the employment is exercised in Australia. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in Australia. 2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of Country Y in respect of an employment exercised in Australia shall be taxable only in Country Y if: a) the recipient is present in Australia for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the year of income of Australia, and b) the remuneration is paid by, or on behalf of, an employer who is not a resident of Australia , or is borne by or deductible in determining the profits attributable to a permanent establishment which the employer has in Country Y , and c) the remuneration is neither borne by nor deductible in determining the profits attributable to a permanent establishment which the employer has in Australia. You are a resident of Country Y for taxation purposes. You are not in Australia for more than 183 days carrying out work for your employer and your salary and superannuation is deductable in determining the profits of the Australian company. Therefore the income you derive which relates to the work you carry out in Australia is assessable in Australia. The rest of the income you derive is for work carried out in Country Y and the Country Y tax authorities has the taxing rights on that income.