ATO Interpretative Decision

ATO ID 2002/215

Income Tax

• This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions.
  Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series. The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953.

Issue

Is the taxpayer, a resident of the United States of America (USA), assessable on their Australian sourced lecturing fee under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. The taxpayer, a resident of the USA, is not assessable on their Australian sourced lecturing fee under subsection 6-5(3) of the ITAA 1997 as this income is exempt from tax under Article 14 of Schedule 2 to the International Tax Agreements Act 1953 (the Agreements Act).

Facts

The taxpayer is a resident of the USA and is a non resident for Australian tax purposes.

The taxpayer is a professor employed by a USA university.

The taxpayer was engaged by a Australian body to give a series of lectures in Australia for which they received a flat fee. The taxpayer performs these services independently of their employment with the USA university.

The taxpayer was present in Australia for a short period of 183 days or less.

The taxpayer has no fixed base in Australia for the purpose of performing their activities.

Reasons for Decision

Subsection 6-5(3) of the ITAA 1997 provides that ordinary income derived by a non resident directly or indirectly from Australian sources, as well as other ordinary income included by a provision on a basis other than having an Australian source, is assessable.

The fee for the lecturing services provided by the taxpayer is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997.

In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreements 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 2 of the Agreements Act contains the double tax agreement between Australia and the USA (USA Convention). The USA Convention operates to avoid the double taxation of income received by Australian and USA residents.

Article 14 of the USA Convention deals with independent personal services. The Article provides that if an individual who is a resident of the USA derives income from the performance of services in an independent capacity the income shall be taxable only in the USA.

However, there are two exceptions when services are performed by a USA resident in Australia. The first is where the individual is present in Australia for more than 183 days during the Australian income tax year. The second is where the individual has a fixed base regularly available in Australia for the purpose of performing their activities. In both cases the income is subject to tax in Australia.

The lecturing fee is income received by the taxpayer from the performance of personal services in an independent capacity. Although the services were performed in Australia, the taxpayer was not present in Australia for more than 183 days and did not have a fixed base in Australia. Accordingly, the income is taxable only in the USA and is not assessable under subsection 6-5(3) of the ITAA 1997.

Year of income:  Year ending 30 June 2002

Legislative References:
Income Tax Assessment Act 1997
   section 6-5(3)

Keywords
United States
Exempt income
Academic staff

Siebel/TDMS Reference Number:  DW323196

Business Line:  Small Business/Individual Taxpayers

Date of publication:  28 February 2002

ISSN: 1445-2782