1 Is the income you derive from your employment in Country Z assessable in Australia?
1 No. Question 2 Is the income you derive from your employment which is partially in Country Z assessable in Australia? Answer 2 No. This ruling applies for the following period: Year ended 30 June 20XX The scheme commenced on: 1 July 20XX
You are a resident of Australia for taxation purposes. You are employed by Employer Z in Country Z. You are a full-time employee working a number of days each month. You have a visa which your employer applies to renew periodically on your behalf. Your current visa is valid until a future year. Due to the nature of Employer Z's operations most of your duties are in multiple countries. You do not travel to Australia as part of your duties. You pay income tax on the income earned from Employer Z in Country Z. Your employer complies with all relevant local taxation obligations.
Income Tax Assessment 1997 section 6-5 International Tax Agreements Act 1953
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, in determining liability to tax on the foreign source income of an Australian resident, it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreement. 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 Country Z Agreement is listed in the Agreements Act. The Country Z Agreement operates to avoid the double taxation of income received by residents of Australia and Country Z.
The Country Z agreement provides that salaries and wages derived by an Australian resident individual in respect of employment carried out in Country Z may be taxed in both Australia and Country Z. The Agreement contains an exception which may give sole taxing rights to Australia if employment is carried out in Country Z for periods not exceeding 183 days in a 12 month period; however, this is not relevant in your situation. The Agreement provides Country Z with sole taxing rights on remuneration derived in respect of specific types of employment exercised by an enterprise of Country Z. Taxation Ruling TR 2001/13 Income tax: Interpreting Australia's Double Tax Agreements states that it has been accepted by the courts that the OECD Model Tax Convention and Commentaries provides appropriate guidance when interpreting the terms used in double tax agreements. The Commentary on the OECD Model Tax Convention on Income and on Capital (2017) states that the right to tax profits of an enterprise of a contracting state from the operation of specific businesses resides only in that state.
In your case, the Agreement will apply so that the employment income you derive from Employer Z will not be assessable in Australia.