Private ruling: Assessability of foreign sourced income
Published: May 2013
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013
Date scheme commenced: 28 May 2012

Ruling: Question and answer | Is the income that you derive from you employment in country C assessable in Australia? | No.


Relevant legislative provisions: Income Tax Assessment Act 1997, Section 6-5(3)

Reasons for decision: Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. Generally, Australian courts have held that the source of employment income is where the employee performs their duties as in case Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 7 AITR 76; 11 ATD 288). Employment income earned while carrying out duties in Australia is considered to be sourced in Australia. Employment income earned while being carried out overseas is considered to be sourced in that overseas country, unless it is merely incidental to the performance of the taxpayer's duties in Australia. In your case, as you are a foreign resident for tax purposes and your employment income is sourced from employment that is exercised in country C, the income is not assessable in Australia under section 6-5(3) of the ITAA 1997.

Relevant facts: You are employed by an Australian organisation. | Through your Australian employment you secured an employment contract in country C with an organisation based in that country. | As a consequence of accepting the employment contract were required to relocate to country C. | You left Australia to take up your employment contract in country C. | The arrangements of the country C employment assignment are such that you have 2 employment contracts, one with an Australian organisation and one with an organisation in country C. | You receive a wage from both organisations for the employment services that are carried out in country C. | When you relocated to country C you became a non-resident of Australia for income tax purposes.