Private ruling: Assessability of income
Date of advice: 12 April 2017
Published: September 2017
Ruling period: Year ending 30 June 2017 | Year ending 30 June 2016 | Year ending 30 June 2015 | Year ending 30 June 2014 | Year ending 30 June 2013 | Year ending 30 June 2012 | Year ending 30 June 2011 | Year ending 30 June 2010
Date scheme commenced: 1 July 2009

Ruling: Question 1 and answer | Is the income you receive from your Country X employer assessable income in Australia? | Yes. | Question 2 and answer | Does Country X have the right to tax the income you receive from the company for duties undertaken in Country X? | Yes.

Relevant facts and circumstances: You are a tax resident of Australia. You are employed by a Country X Company. The work you do for the Country X Company is mainly physically conducted online in Australia. This work mainly relates to Country X business operations and secondly to Australian business development. Your duties for the company include management of bookings. The bookings are done online and administered by you in Australia. You are required to travel to Country X periodically. You estimate X% of your time spent working for the company is physically conducted in Country X. You estimate XX% of your work is physically conducted in Australia but relates to Country X business operations. The remaining X% of your time is physically spent in Australia developing the company's Australian business opportunities.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5(2) | International Tax Agreements Act 1953 | Income Tax Assessment Act 1936

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. Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In your case, you are a resident of Australia receiving ordinary income from a Country X Company. Therefore, all the income you receive from your Country X employer is assessable income in Australia. In determining liability to Australian tax on foreign sourced income received by an Australian resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement enforceable under the International Tax Agreements Act 1953 (the Agreements Act). 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 X Agreement is listed in section 5 of the Agreements Act. An agreement between Australia and Country X operates to avoid the double taxable of income. An article of the agreement with Country X considers the tax treatment of income from employment and provides that salaries, wages and other similar remuneration derived by a resident of Australia in respect of an employment shall be taxable only in Australia unless the employment is exercised in Country X. If the employment is so exercised in Country X, such remuneration as is derived therefrom may be taxed in Country X. In your case, you are an Australian resident employed by a Country X Company. Your income you receive from the company from duties undertaken in Country X may be taxable as your employment is exercised in Country X. Another article in the agreement operates to make your salary only assessable in Australia. You did not satisfy the provisions of this article. Therefore, the income you receive for your duties undertaken in Country X may be taxed in Country X.