Private ruling: Assessability of employment income in Australia
Published: August 2011
Ruling period: Year ending 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Question and answer: | Is your salary from an Australian employer taxable in Australia? | No.

Relevant facts and circumstances: You are a citizen of Australia. You are not a resident of Australia for tax purposes. You live in Country X and have a Country X residency permit. You have an employment contract with an Australian employer. You carry out your employment duties in Country X. You pay tax on your salary from your Australian employer in Country X.

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

Reasons for decision: Summary: Subsection 6-5(3) of the Income Tax Assessment Act 1997 states: 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; and · other ordinary income that a provision includes in your assessable income for the income year on some basis other than having an Australian source. In your case you are a non-resident of Australia and you are deriving employment income from an Australian employer, which is an Australian source. Therefore, according to subsection 6-5(3) of the ITAA 1997, your employment income is taxable in Australia. However, Australia currently has an agreement with Country X for the avoidance of double taxation with respect to taxes on income. Article 15 of this agreement considers the assessability of salary and wages income. Article 15 states: … salaries, wages and other similar remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived from that exercise may be taxed in that other State. In your case you are a resident of Country X and you carry out your employment duties in Country X. Therefore, the employment income you derive from your Australian employer is not assessable income to you in Australia and does not need to be included in your Australian income tax return.

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