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Is the remuneration received by a resident taxpayer for services rendered to the government in Fiji assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. Even though the remuneration received by a resident taxpayer for services rendered to the government in Fiji would be assessable under subsection 6-5(2) of the ITAA 1997, Article 19(1) of Schedule 32 to the International Tax Agreements Act 1953 (the Agreements Act) applies and the remuneration is not taxable in Australia.

The taxpayer is an Australian resident for income tax purposes.

The taxpayer received remuneration from the Fijian Government for services rendered in Fiji.

The taxpayer paid tax on the remuneration in Fiji.

Subsection 6-5(2) of the 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.

Remuneration for services rendered is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.

In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the Agreements Act.

Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions).

Schedule 32 to the Agreements Act contains the double tax agreement between Australia and Fiji (the Fijian Agreement). The Fijian Agreement operates to avoid the double taxation of income received by Australian and Fijian residents.

Article 19(1) of the Fijian Agreement provides that remuneration paid by Fiji to any individual in respect of services rendered in the discharge of governmental functions will be taxable only in Fiji. However, the remuneration will be taxable only in Australia if the services are rendered in Australia and the recipient is a resident of and a citizen of Australia.

As the taxpayer rendered services in Fiji, the remuneration received in the discharge of governmental function will be taxable only in Fiji under Article 19(1) of the Fijian Agreement.

Accordingly, the remuneration received by the taxpayer from Fiji will not form part of their assessable income under subsection 6-5(2) of the ITAA 1997.