Private ruling: Assessability of salary and wages
Published: April 2014
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013
Date scheme commenced: 1 July 2011

Ruling: Q1: Are the salary and wages paid to you by the Embassy for your services to the foreign government working in Australia exempt in Australia? | A1: Yes | Q2: Did the outcome change when you and your spouse became permanent residents of Australia? | A2: No

Relevant facts and circumstances: You are a citizen of a foreign country. You arrived in Australia with your spouse (a citizen of another foreign country) as a de facto spouse on their 457 visa during the year ended 30 June 20XX. You and your spouse came to Australia with the intention of living and working here and eventually becoming permanent residents. You did not have any employment arrangements when you arrived; you did not come to Australia specifically to take up the position for the foreign government. During the 20YY financial year you both applied for permanent residency and became permanent residents of Australia during the year ended 30 June 20YY. You have worked for the organisation on behalf of the foreign government in Australia since commencing during the year ended 30 June 20XX. For one month during the 20XX financial year and for the year ended 30 June 20YY you received salary and wages from your employer for services carried out on behalf of the foreign government. This arrangement is one of salary and wages or similar remuneration; not as an independent contractor.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Subsection 995-1(1) | Income Tax Assessment Act 1997 Subsection 768-910(1)

Reasons for decision: Summary: In determining your liability to pay tax in Australia we not only have to consider the Australian domestic income tax laws but also any applicable tax agreements. Australia has a tax agreement with country X (the Agreement) which ensures that income received by residents of Australia or country X can avoid paying tax twice on the same income earned in either country. The Agreement contains several Articles that explain the taxing rights for different types of income. One of the articles explains that salaries or wages derived from government service paid by country X to an individual for services rendered to country X may be taxed only in country X. However, such remuneration is taxable only in Australia if the services to which the remuneration relates are carried out in Australia by an individual who is a resident of and national or citizen of Australia, who is not also a citizen of country X. | Detailed Reasoning - Becoming an Australian resident: You are a citizen of country X and you have become a resident of Australia. You were rendering your services for the country X organisation in Australia on behalf of that country's government. Accordingly, in accordance with the Agreement, the salary you derived in respect of these services is not taxable in Australia. This applies to the periods both before and after you became a resident of Australia for tax purposes as you are still a citizen of country X.