Private ruling: income from overseas
Published: April 2012

Ruling: Is the income from overseas included as assessable income on your Australian tax return? | No. | Year ended 30 June 2011 | 1 July 2010 | You were a foreign resident. | You arrived in Australia in July 2010 on a permanent resident visa. | From July 2010 you are an Australian resident for tax purposes. | When overseas you were employed in a government department. After arriving in Australia you received payments from overseas in respect of your government services. | Income Tax Assessment Act 1997 Section 6-5. | International Tax Agreements Act 1953 Section 4. | Australian Treaties Series . | Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. | Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. | Taxation Ruling TR 98/1 sets out the Commissioner's policy on the derivation of income. Paragraph 42 of TR 98/1 states that income from employment would normally be assessable on a receipts basis. Salary, wages or other employment remuneration are assessable on receipt even though they relate to a past or future income period. | In your case, you received the income from overseas in relation to your previous employment. | In determining liability to tax for Australian residents, it is necessary to consider not only the income tax laws but also the laws under the International Tax Agreements Act 1953 (Agreements Act) and any applicable double tax agreement contained in the Australian Treaties Series (ATS). | Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Subsection 4(2) of the Agreements Act provides that the Agreements Act overrides the ITAA 1997 where there are inconsistent provisions (apart from Australia's general anti-avoidance rules and certain provisions dealing with limitations of tax credits). | Under the relevant article of the Agreement, salaries, wages and other similar remuneration paid by the overseas country to an individual in respect of services rendered in the discharge of governmental functions shall be taxable only in that overseas country. However, such salaries, wages and other similar remuneration shall be taxable only in Australia if the services are rendered in Australia and the recipient is a resident of Australia who: | § (a) is a national of Australia, or | § (b) did not become a resident of Australia solely for the purpose of rendering the services. | In Taxation Ruling TR 2005/8, the term ' services rendered in the discharge of governmental functions' with reference to the UK Agreement means those services rendered by an employee in the completion or performance of any functions undertaken by government. | In your case, you are a resident of Australia who received wages from overseas in relation to your services in an overseas government department. | Your overseas employment duties fall within the meaning of services in discharge of governmental functions. Accordingly, the salary and wages that you received from overseas are taxable only in the overseas country under the relevant article of the relevant Agreement. | Consequently, the salary and wages are not assessable in Australia and are not included as assessable income on your 2011 tax return.




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