Private ruling: Foreign income
Date of advice: 25 November 2016
Published: April 2017
Ruling period: Year ending 30 June 20YY | Year ended 30 June 20ZZ
Date scheme commenced: 20XX

Ruling: Question and answer | Is the source of your income Country Y and therefore foreign income? | Yes.

Relevant facts and circumstances: You were a resident of Australia for taxation purposes for the 20XX/20YY and 20YY/20ZZ income years. You were employed by an Australian company. You worked in Country Y as a fly in fly out worker. Your employer paid your salary into your Australian bank account through their payroll system. You were paid superannuation for the period of time you were working in Country Y. Your employer has listed your income as foreign income on your payment summaries. Your contract stated that the company would withhold and remit taxes based on the Country Y tax regime. Therefore your employer is not responsible for Individual tax liabilities that may arise in the home or host country as a result of your assignment to. The company will withhold the appropriate income tax withholding on your salary and wages in accordance with home and host country taxation laws. Your employer offered access to taxation advice as part of your contract. Assumption(s) None

Relevant legislative provisions: Income tax Assessment Act 1997 section 6-5.

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. You were a resident of Australia for taxation purposes for the period you were working in Country Y, therefore you are required to declare in your Australian tax return all income derived both in and outside Australia. ● The source of a taxpayer's income is the place where the services are performed: French v. FC of T (1957) 98 CLR 398. ● In your case the income you derived while working in Country Y is foreign income and had its source in Country Y. Your work contract clearly stated that you would be paying tax in Country Y and relevant laws would be taken into consideration from the host and home countries where tax was concerned. The income is listed as foreign income on your payment summary. The income is considered to be foreign income even though you were paid by an employer who is based in Australia. Your circumstances cannot be compared to those set out in FCT v Mitcham (1965) 113 CLR 401, as you were an employee and Mr Mitcham was not an employee he was a consultant actor. Therefore the income you derived while in Country Y is foreign income.