Private ruling: Foreign source income
Published: April 2015
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 10 January 2019
Date scheme commenced: On or after 1 January 2015

Ruling: Question and Answer | 1. Is the income you will derive from your employment in a foreign country flying in international routes assessable in Australia? | No.

Relevant facts and circumstances: You have accepted a contract of employment in a foreign country. You will be employed as a pilot. The contract will be for several years. Your employment will initially be for ground based training. You will then be flying on international routes. You will not be relocating your family to a foreign country or anticipating moving from your residence in Australia, whether your job will be in a foreign country or via a reverse scheduling point within Australia. You will be taxed in a foreign country on the employment income, even if your scheduling involves flights to and from Australia.

Relevant legislative provisions: Taxation Administration Act 1953 Subsection 359-10(3) of Schedule 1 | Income Tax Assessment Act 1997 Subsection 6-5(2) | International Tax Agreements Act 1953 Section 5 | Income Tax Assessment Act 1936

Reasons for decision: Detailed Reasoning - Flying international routes: 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. 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 foreign country Agreement is listed in section 5 of the Agreements Act. The foreign country Agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The foreign country Agreement operates to avoid the double taxation of income received by residents of Australia and a foreign country. The foreign country Agreement states at Article 15, paragraph 3: Notwithstanding the provisions of paragraphs (1) and (2), remuneration derived in respect of an employment exercise aboard a ship or aircraft operated by an enterprise of a Contracting State in international traffic, shall be taxable only in the Contracting State of which the enterprise is a resident. In your case, as your employment will be exercised for an enterprise based in a foreign country which will involve flights on international routes, the income will be taxable only in a foreign country and will not, therefore, be assessable in Australia under section Subsection 6(2) of the ITAA 1997.