Private ruling: Assessability of income
Date of advice: 21 November 2016
Published: March 2017
Ruling period: Year ended 30 June 20SS | Year ending 30 June 20TT | Year ending 30 June 20UU | Year ending 30 June 20VV | Year ending 30 June 20WW | Year ending 30 June 20XX | Year ending 30 June 20YY | Year ending 30 June 20ZZ
Date scheme commenced: 1 July 20RR

Ruling: Question and answer | Is the income you earn in Australia as a specialist assessable income in Australia? | No.

Relevant facts and circumstances: You are a citizen of country A and a resident of country A for taxation purposes. You are a specialist. You entered into a contract with an Australian company to prepare reports on Australian cases. You fly to Australia for less than 4 days once a month. When you are in Australia you interview various cases in consulting rooms organised by the Australian company and return to country A to prepare reports for the Australian company. You have an ABN and are registered for GST. You conduct the work as a contractor. You are not an employee.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(3). | International Tax Agreements Act 1953 Section 4. | International Tax Agreements Act 1953 Section 5.

Reasons for decision: Summary: Generally speaking, if you are a foreign resident, your assessable income includes the ordinary income you derived directly or indirectly from all Australian sources during the income year, as stated in subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997). However, 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 the section has the force of law. The country A Agreement is listed in section 5 of the Agreements Act. The country A agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The country A agreement operates to avoid the double taxation of income received by residents of Australia and country A. An article of the country A agreement defines business as including “the performance of professional services and of other activities of an independent character”. An article of the country A agreement defines permanent establishment as “a fixed place of business through which the business of the enterprise is wholly or partly carried on”. In your case, you are a resident of country A. You work as a specialist in Australia for short periods of time and you are not an employee. Therefore, your services fall within the definition of 'business'. As you work for short periods in an information collecting capacity, you do not have a 'permanent establishment' in Australia. Therefore, under an article of the country A agreement, your income is only taxable in country A as you were not carrying on your professional services through a permanent establishment in Australia. The income you earned while working as a specialist in Australia is therefore not assessable income in Australia. You will need to include this income in your country A tax return.