ATO Interpretative Decision

ATO ID 2004/78

Income Tax

Assessability of employment income received by visiting professor from India
FOI status: may be released

This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade.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.

Status of this decision: Decision Current

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If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Are the salary and wages received by a taxpayer who is a resident of India, from employment as a visiting professor at an Australian university, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. The salary and wages received by a taxpayer who is resident of India, from employment as a visiting professor at an Australian university, are not assessable under subsection 6-5(3) of the ITAA 1997.

Facts

The taxpayer is a resident of India and a non-resident of Australia for Australian income tax purposes.

The taxpayer is employed by an Australian university as a visiting professor.

The taxpayer will be present in Australia for the purposes of teaching for a period of less than two years.

The taxpayer receives salary and wages from the university.

Reasons for Decision

Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from Australian sources during the income year.

Salary and wages are ordinary income for the purposes of subsection 6-5(3) 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 International Tax Agreements Act 1953 (Agreements Act).

Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one.

Schedule 35 to the Agreements Act contains the double tax agreement between Australia and the Republic of India (the Indian Agreement). The Indian Agreement operates to avoid the double taxation of income received by Australian and Indian residents.

Article 20(1) of the Indian Agreement provides that where a professor or teacher who is a resident of India visits Australia for a period not exceeding two years for the purpose of teaching or carrying out advanced study or research at a university, college, school or other educational institution, any remuneration that person receives for such teaching, advanced study or research shall be exempt from tax in Australia to the extent to which such remuneration is, or upon the application of this Article will be, subject to tax in India.

Article 20(2) of the Indian Agreement provides that the Article shall not apply to remuneration which a professor or teacher receives for conducting research if the research is undertaken primarily for the private benefit of a specific person or persons.

The taxpayer is a resident of India who is visiting Australia for a period of less than two years for the purpose of carrying out employment as a visiting professor at an Australian university. Under Article 20(1) of the Indian Agreement, the salary and wages received by the taxpayer from employment as a visiting professor at an Australian university is exempt from tax in Australia.

Accordingly, the salary and wages received by the taxpayer are not assessable under subsection 6-5(3) of the ITAA 1997.

Note: In accordance with section 12-1 of Schedule 1 to the Taxation Administration Act 1953, the Australian university should not withhold tax from the taxpayer's salary and wages as the amount is exempt income in the taxpayer's hands.

Date of decision: 27 November 2003

Year of income: Year ended 30 June 2004

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

International Tax Agreements Act 1953
   section 4
   Schedule 35
   Schedule 35, Article 20(1)
   Schedule 35, Article 20(2)

Taxation Administration Act 1953
Schedule 1, section 12-1

Keywords
Academic staff
Double tax agreements
Exempt income
India
International tax
PAYG withholding
PAYG withholding payments to employees
Salary & wages income

Siebel/TDMS Reference Number: 3792696

Business Line: Public Groups and International

Date of publication: 30 January 2004

ISSN: 1445-2782

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