Private ruling: Assessability of Income
Published: December 2013
Ruling period: Year ending 30 June 2012 | Year ending 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are the salary and wages derived by you from your work for Country X assessable in Australia? | A1: No

Relevant facts and circumstances: You are a foreign citizen You are living in Australia on a temporary visa. Your spouses posting will end in month X year xxxx You have been temporarily employed by the Country X government in Australia. Your employment may be renewed for another year. You monthly salary is paid by the overseas employer to your overseas bank account You are taxed by the overseas Government You do not have any other form of employment in Australia Double tax agreement exits between Australia and the overseas country

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2). | International Tax Agreements Act 1953 Section 4.

Reasons for decision: Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997 . In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 ( ITAA 1936 ) and ITAA 1997 so that those Acts are read as one. The agreement between the Commonwealth of Australia and Country X for the Avoidance of Double taxation and the Prevention of Fiscal Evasion with respect to Taxes on income contains the agreement between Australia and overseas country for the avoidance of double taxation (DTA). Article 17 of the DTA outlines that remuneration paid by the Country X government, to a individual who is a Country X citizen will only be taxed on that income in Country X. Unless the employment is exercised in Australia by a individual who is an Australian citizen or ordinarily resident in Australia when it will be taxable only in Australia. This means that in the case of a foreign citizen who is employed in Australia by the Country X government (i.e. working in embassies and consulates) the Country X has the sole taxing right to the remuneration. As you are an overseas citizen and the salary or wages paid to you are remuneration paid by the overseas ministry of foreign affairs for your temporary employment by the Country X government in Australia, the salary or wages shall be exempt from tax in Australia.