Private ruling: Double taxation agreement
Date of advice: 23 September 2025
Published: 10 November 2025
Ruling period: Income tax year ending 30 June 20YY | Income tax year ending 30 June 20YY | Income tax year ending 30 June 20YY | Income tax year ending 30 June 20YY | Fringe Benefit Tax (FBT) year ending 31 March 20YY | FBT year ending 31 March 20YY | FBT year ending 31 March 20YY | FBT year ending 31 March 20YY
Date scheme commenced: 1 April 20YY

Ruling: Q1: While the Employee is working on secondment in Australia, is the 'income from employment' (consisting of salary, and performance bonuses paid by their Home Country Employer) taxable in Australia, under Article 14 of the Double Taxation Agreement (DTA) between Australia and the foreign country? | A1: Yes. | Q2: While the Employee is working on secondment in Australia, are the benefits (including fringe benefits provided by their Home Country Employer) taxable in Australia under Article 14 of the DTA between Australia and the foreign country? | A2: Yes.

Relevant facts and circumstances: The Home Country Employer is a foreign corporation incorporated and registered in the foreign country. The Australian Employer is a company incorporated and operating in Australia. It does not qualify as a permanent establishment in Australia, under the Australia-X country DTA. The Home Country Employer holds some ownership stake in the Australian Employer. The employee was seconded to Australia from several years ago and is sponsored by the 'Australian Employer'. The employee performs their duties exclusively for the Australian Employer. Most of their salary and fringe benefits are paid by Australian Employer. The employee also receives a salary, and performance bonuses and some fringe benefits directly from the Home Country Employer. The employee is being taxed as an Australian resident.

Relevant legislative provisions: Taxation Administration Act 1953 section 12-35 | Fringe Benefit Tax Assessment Act 1986 section 136 Taxation Ruling TR 2001/13 | Taxation Ruling TR 2013/1 | International Tax Agreements Amendment Bill (No.1) 2008 Explanatory Memorandum | Convention between Australia and X for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income Article 5 | Convention between Australia and X for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income Article 14

Reasons for decision: Summary: Under the DTA, Australia has taxing rights over the income from employment earned by the Employee while they are working on secondment in Australia. The salary, and performance bonuses paid by their Home Country Employer are taxable in Australia under the Income Tax Assessment Act 1997 (ITAA 1997). As the payer of the income from employment, the Home Country Employer may have obligations under Australian law. The Australian Employer would be able to undertake any reporting and withholding obligations on behalf of the Home Country Employer. | Detailed Reasoning - Detailed Reasoning: Interpretation Now! Episode 53 - interpretation of DTAs explains that the overarching objectives of DTAs are the avoidance of double taxation (on specified types of income) and the combatting of fiscal evasion. A DTA becomes part of Australia's domestic law once it has been legislated by parliament. The Agreements Act gives our DTAs the force of law and requires the Assessment Acts to be 'read as one' with the Agreements Act. Thus, the legislated DTA text becomes part of the overall legislative framework for assessing the income tax liabilities of relevant taxpayers and has priority over the Assessment Acts. Taxation Ruling TR 2001/13: Interpreting Australia's Double Tax Agreements confirms thatthe terms of the DTA overrides those of the Assessment Acts; this means that if a DTA is in force it cannot be overlooked. The factual scenario in this case involves an employee of a foreign entity, who has been working on secondment for several years, for an Australian entity. Most of the employee's salary, as well as the fringe benefits that are provided are paid by the Australian entity. The employee remains on the payroll of their Home Country Employer and is also paid a salary, fringe benefits and performance bonuses directly from them. There is a legislated DTA currently in place between Australia and the foreign country. As the DTA has priority over other domestic laws, it is necessary to consider how it applies in allocating the taxing rights between the two jurisdictions over the different categories of income. For DTA purposes, the type of remuneration paid to the employees is 'income from employment'. As explained in the X Explanatory Memorandum: Article 14 -- Income from Employment Basis of taxation 1.230 This Article generally provides the basis upon which the remuneration of visiting employees is to be taxed. However, this Article does not apply in respect of income dealt with separately in: • Article 15 (Directors' Fees); • Article 16 (Entertainers and Sportspersons); • Article 17 (Pensions and Annuities); and • Article 18 (Government Service). 1.231 Generally, salaries, wages and similar remuneration derived by a resident of one country from an employment exercised in the other country may be taxed in that other country. However, subject to specified conditions, there is a conventional provision for exemption from tax in the country being visited where visits of only a short-term nature are involved. [Article 14, paragraphs 1 and 2] Short-term visit exemption 1.232 The conditions for this exemption are that: • the period of the visit or visits does not exceed, in the aggregate, 183 days in any 12-month period commencing or ending in the taxable year of the visited country; • the remuneration is paid by, or on behalf of, an employer who is not a resident of the visited country; and • the remuneration is not borne by a permanent establishment which the employer has in the country being visited. 1.233 Where all of these conditions are met, the remuneration so derived will be liable to tax only in the country of residence of the recipient. [Article 14, paragraph 2] 1.234 Where a short-term visit exemption is not applicable, remuneration derived by a resident of Australia from employment in X may be taxed in X. However, this Article does not allocate sole taxing rights to X in that situation. Specifically, the relevant wording of Article 14 of the DTA between Australia and X states: Article 14 INCOME FROM EMPLOYMENT 1. Subject to the provisions of Articles 15, 17 and 18, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that Contracting State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other Contracting State. 2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned Contracting State if: 3. a)the recipient is present in the other Contracting State for a period or periods not exceeding in the aggregate 183 days in any 12 month period commencing or ending in the taxable year of that other Contracting State; 4. b)the remuneration is paid by, or on behalf of, an employer who is not a resident of the other Contracting State; and 5. c)the remuneration is not borne by a permanent establishment which the employer has in the other Contracting State. ... | Detailed Reasoning - Short term visit exception: The ATO Fact Sheet: Foreign resident employers - your tax and super obligations (the Fact Sheet ) states: Many DTAs with Australia provide that, in certain circumstances, employment income earned by a foreign resident while working in Australia for a short period (up to 183 days), is not to be taxed in Australia (the short-term visit exception). If the short-term visit exception does not apply, a DTA may deem employment income earned by a foreign resident while working in Australia to be Australian-sourced and taxable in Australia. The reference above in Article 14, paragraph 2 to working in Australia for a short period is referring to what is known as the short-term visit exception (as per the Fact Sheet ). Where the short-term visit exception applies, the home country entity continues to be treated as the employer. Whilst the general rule, is that the exception will apply, there are some circumstances where the exception is denied. Where this happens, the Australian entity will be treated as the employer. This treatment is based on Australia taking an 'Economic Employer' approach. The ATO view in regard to this issue, is contained in Taxation Ruling TR 2013/1: The identification of 'employer' for the purposes of the short-term visit exception under the Income from Employment Article, or its equivalent, of Australia's tax treaties. It is noted that, deeming an entity to be the economic employer is not changed by the fact that the relevant employees may remain on the payroll of the home country employer or receive some or all of their remuneration from their home country employer. | Detailed Reasoning - Permanent establishment: As per Article 14, paragraph 2 (above), the short-term visit exception may not apply in certain circumstances involving a PE. The Fact Sheet explains that generally employment income will not be taxable in Australia under the short-term visit exception if: the employee's salary and wages are not deductible against the profits of an Australian permanent establishment of their employer. The meaning of the term permanent establishment is set out in Article 5 of the DTA. If it is established that there is a PE, the next condition to be satisfied is whether the remuneration is borne by the PE. The Fact Sheet flags that remuneration is not borne by a PE where the salary and wages are not deductible against the profits of an Australian PE. | Detailed Reasoning - Application to facts: As per paragraph 1 of Article 14 of the DTA, as all of the employment is exercised in Australia, Australia would have the sole or primary taxing rights over all of the employment income earned by employee. However, where an employee is on a short-term visit the short-term visit exception may be applicable. Under Article 14, a short-term visit is one that does not exceed an aggregate amount of 183 days in any 12-month period. In this case, the employee's secondment to Australia first began several years ago. The employee is considered to be working on long-term visits in Australia. Also, in this case, we have been advised that the Australian Employer is not a PE. Consequently, the short-term visit exception would not be available in respect of their employment income. It is concluded that under the DTA, Australia has primary taxing rights on the income from employment derived by the employee. In Australia, the payment of income tax by individuals is principally determined by the ITAA 1997. In this case, in addition to the salary amount paid by the Australian Employer, the employee receives a salary and performance bonuses paid by the Home Country Employer. As noted above, these amounts are income from employment for the purposes of Article 14. These amounts would be also taxed by the ITAA 1997. Where payments are made by the Home Country Employer, this may also give rise to tax and super obligations for that employer. This is because section 12-35 of Schedule 1 to the Taxation Administration Act 1953 provides that an entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity). Accordingly, the Home Country Employer which is the entity that paid the salary and performance bonuses will have an obligation to report and withhold any Pay-As-You-Go ('PAYG') amounts required in relation to these payments. It is noted that the Fact Sheet advises, that where employment income is taxable in Australia, and a foreign employer needs to withhold PAYG, they can arrange for an Australian associate or affiliate to undertake the PAYG withholding obligations on their behalf. In the current case the Home Country Employer has an ownership stake in the Australian Employer; it is assumed that the two employer entities are associates or affiliates of each other. | Detailed Reasoning - Conclusion: While the employee is working on secondment in Australia, the salary and performance bonuses paid by their Home Country Employer are taxable in Australia. The Australian Employer would for example, be able to undertake the PAYG reporting and withholding obligations on behalf of the Home Country Employer, in addition to its other reporting and withholding obligations in relation to the employee. | Detailed Reasoning - Question 2: While the Employee is working on secondment in Australia, are the benefits (including fringe benefits provided by their Home Country Employer) taxable in Australia under Article 14 of the DTA between Australia and the foreign country? | Summary: Under the DTA, Australia has taxing rights over the benefits provided to the employee while they are working on secondment in Australia. Any fringe benefits provided by their Home Country Employer would be taxable in Australia under the Fringe Benefit Tax Assessment Act 1986 (FBTAA). As the provider of the benefits, the Home Country Employer may have Fringe Benefit Tax (FBT) obligations under Australian law. The Australian Employer would be able to undertake any FBT obligations on behalf of the Home Country Employer. | Detailed Reasoning - Detailed Reasoning: A number of different types of income such as dividends, interest, royalties, pensions and annuities are dealt with under separate articles in the DTA between Australia and the foreign country. There is no separate Article dealing with fringe benefits. While Article 14 of the DTA does not specifically refer to taxing rights over fringe benefits, these are regarded as "other similar remuneration to salary and wages". This position is in keeping with the fact that in Australia's DTAs where fringe benefits are specifically referred to, fringe benefits are included in the income from employment Article. This is explained on the basis that taxing rights over fringe benefits provided to employees, are allocated to the country that has the sole or primary taxing right in respect of the underlying employment income, to which the fringe benefits relate. | Detailed Reasoning - Application to facts: As discussed above, as per paragraph 1 of Article 14 of the DTA, because all of the employment is exercised in Australia, Australia would have the sole or primary taxing rights over all of the employment income earned by employee, including fringe benefits. The short-term visit exception would not be available. In this case, the Employee is provided with benefits by their Home Country Employer. The benefits that are provided are fringe benefits for the purposes of the FBTAA and this may give rise to FBT obligations in respect of the benefits. Both employer entities are 'current employers' as defined in subsection 136(1) of the FBTAA, as they are liable to pay salary or wages. Currently the Australian Employer only reports and withholds in relation to benefits that it provides. As a current employer, the Home Country Employer may have FBT obligations in respect of the fringe benefits it provides. | Detailed Reasoning - Conclusion: While the Employee is working on secondment in Australia, benefits provided by their Home Country Employer may be taxable in Australia. The Australian Employer would be able to undertake FBT obligations on behalf of the Home Country Employer, in addition to its other FBT obligations in relation to the employee.