Private ruling: Assessability of foreign employment income
Published: March 2014
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2014

Ruling: Question and answer | Will your employment income be taxable in Australia? | No.

Relevant facts and circumstances: You are a citizen and resident of Australia. You have applied for an employment position with Entity X based in Country Y. Your employment will be coordinated by a Country Z based employment agency. Your employment contract will be with Entity X, which is based in Country Y. Entity X will pay your salary to the employment agency that will then pay you via a Country Z bank account. The salary you receive will be net after Country Y taxes.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5. | International Tax Agreements Act 1953 Section 4. | International Tax Agreements Act 1953 Section 5.

Reasons for decision: Summary: Generally, under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), salary and wages are assessable income in Australia where the person is a resident of Australia for tax purposes, even where the income was derived from overseas employment. However, 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 is listed in section 5 of the Agreements Act. The Country Y agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The Country Y agreement operates to avoid the double taxation of income received by residents of Australia and Country Y. Article 15 of the Country Y agreement states that "remuneration derived in respect of an employment exercised aboard a ship or aircraft operated by an enterprise of a Contracting State in international traffic, shall be taxable only in the Contracting State of which the enterprise is a resident". In your case, you will be employed in a specific position and therefore in international traffic, and the craft will be operated by Entity X, which is an enterprise of Country Y. Therefore the salary you earn will only be taxable in Country Y. Therefore, the salary you earn from your employment with Entity X is not assessable income in Australia.