Private ruling: INTL - income - DTA
Date of advice: 24 June 2016
Published: August 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020
Date scheme commenced: 1 July 2015

Ruling: Question and answer | Is the income you derive in Country Y assessable in Australia? | No.

Relevant facts and circumstances: You have gone to Country Y to live. You are a non-resident of Australia for taxation purposes. You are employed by an Australian company. You carry out your work duties for the Australian company from your home in Country Y. You pay tax on the money you earn from the Australian company in Country Y.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2) | International Tax Agreements Act 1953 Section 4 | International Tax Agreements Act 1953 Schedule 18 Article 15

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. The source of a taxpayer's income is the place where the services are performed: French v. FC of T (1957) 98 CLR 398. In your case you are living in Country Y and will perform the work duties for the Australian company from your home in Country Y. The source of this income is Country Y. 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 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 agreement between Australia and Country Y, deals with dependant personal services. It states: 1. Subject to the provisions of Articles 16, 18, 19 and 20. Salaries, wages and other similar remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived from that exercise may be taxed in that other State. As a non-resident of Australia you are not taxed on the income you derive from the Australian company in Country Y. You are not required to declare this income in your Australian tax return. You are however, required to declare any Australian source income in your Australian tax return. | Detailed Reasoning - Please note:: The Commissioner will not rule for an indefinite period of time, this is due to the fact that your circumstances can change and the current law may also change. The Commissioner will generally rule for the current financial year plus four years into the future.