Private ruling: Assessable income
Published: March 2014
Ruling period: Year ending 30 June 2013 | Year ending 30 June 2014
Date scheme commenced: 22 October 2012

Ruling: Question and answer: | Is your employment income that is being remunerated by an Australian entity assessable in Australia? | No.

Relevant facts and circumstances: You are an Australian citizen. You moved to country T and became a no-resident of Australia for income tax purposes. While in country T, you have remained employed by your Australian employer who remunerates you for your services through salary and wages. The income that you are deriving from your Australian employer is for employment that is being exercised via the internet from country T.

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

Reasons for decision: Summary: Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a non-resident of Australia includes all the ordinary income derived directly or indirectly from all Australian sources during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. ATO Interpretative Decision ATO ID 2002/181 Income Tax: Non-resident in receipt of Australian sourced employment income, discusses the assessability of Australian sourced income derived by a non-resident of Australia for income tax purposes. ATO ID 2002/181 states; Generally, Australian courts have held that the source of employment income is where the employee performs their duties ( C of T (NSW) v. Cam and Sons Ltd (1936) 36 SR (NSW) 544; 4 ATD 32 and FC of T v. French (1957) 98 CLR 398; (1957) 7 AITR 76; 11 ATD 288). The courts also confirmed that it is appropriate to apportion income earned to reflect the source of income. Thus, 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, you are a non-resident of Australia who is exercising your employment tasks in country T. Therefore regardless of whom you are being remunerated by and consistent with the views expressed in ATO ID 2002/181 your employment income is being sourced in country T. Therefore, as you are a non-resident of Australia for tax purposes and your employment income is not sourced from Australia it is not assessable in Australia under section 6-5(3) of the ITAA 1997.