Private ruling: A Double Tax Agreement
Published: December 2013
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to a tax free threshold? No.

Relevant facts and circumstances: You came to Australia on a working holiday visa on a date and left Australia on a later date. You were taxed as a non-resident during this period. Country Y provides a personal allowance tax free threshold which you are entitled to.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2) | International Tax Agreements Act 1953 Section 4 | International Tax Agreements Act 1953 Section 5 | Income Tax Rates Act 1986 Schedule 7 Part II Section 1 Reasons for decision | Section 6-5 of the Income Tax Assessment Act 1997 states where you are a foreign resident, your assessable income includes only income derived from an Australian source. | The rates of tax for a foreign resident are set down in Part II of Schedule 7 of the Income Tax Rates Act 1986 (ITRA) . This provides that the rate of tax for the income year for incomes below $80,000 is 32.5 cents per dollar. The rates apply from the first $80,000 of income. 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 operates to avoid the double taxation of income received by residents of Australia and Country Y. | Article xx of the agreement deals with non-discrimination. It states: | 1) Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances, in particular with respect to residence, are or may be subjected. | Article xx states we will not subject any Country Y citizen to a more burdensome taxation requirement than we would subject Australian citizens to. However, Australian citizens may also be foreign residents for tax purposes, and these citizens are taxed at the same rates applicable to any foreign resident of Australia for tax purposes regardless of their nationality. | In your case you were taxed as a foreign resident of Australia for taxation purposes for the period you were in Australia on a working holiday. Under Part II of Schedule 7 of the ITRA, you are not entitled to a tax free threshold (that is, your income is taxed from the first dollar). You have not been discriminated against in accordance with Article xx of the agreement as the rates of tax applicable to your income would also apply to a citizen of Australia who was a foreign resident for tax purposes.