Edited version of private advice

Authorisation Number: 1052283709915

Date of advice: 8 August 2024

Ruling

Subject: Taxing right of income under double tax agreements

Question

Is the income you derive under a fixed term contract of employment with an Australian university exempt from tax in Australia under the double tax agreement with Country A?

Answer

Yes.

Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a foreign resident taxpayer includes ordinary income that is sourced directly or indirectly from all Australian sources during the income year.

Subsection 6-10(5) of the ITAA 1997 provides that assessable income of a foreign resident taxpayer includes statutory income from all Australian sources.

Employment income is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997.

Subsection 6-20(2) of the ITAA 1997 provides that ordinary income is exempt to the extent that 'this Act' excludes it from being assessable income. 'This Act' is defined to include the Income Tax Assessment Act 1936 (ITAA 1936).

In determining your liability to pay tax in Australia it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreement.

Country A's Double Tax Agreement with Australia

Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the 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. Country A is listed in section 5 of the Agreements Act.

The Agreement operates to avoid the double taxation of income received by residents of Australia and Country A.

Article 19 of the Agreement states:

1.    A professor, teacher or researcher who visits one of the Contracting States, for a period not exceeding two years, for the purpose of teaching or engaging in research at a university, college, school or other recognised educational institution in that Contracting State, and who immediately before that visit was a resident of the other Contracting State, shall, for a period not exceeding two years from the date of first arrival in that first-mentioned State for that purpose, be exempt from tax in that first-mentioned State on the remuneration for such teaching or research, to the extent that the remuneration is subject to tax in the other Contracting State.

2.    No exemption shall be granted under paragraph 1 with respect to any remuneration for research if such research is undertaken not in the public interest but primarily for the private benefit of a specific person or persons.

As you are a researcher visiting Australia for a period not exceeding two years for the purpose of research at a university, and who was a resident of country A immediately before your visit, you are exempt from taxation in Australia in respect to the remuneration for that research, subject to that income being taxed in country A.

The exemption is allowable as your research relates to a matter which is in the public interest.

Consequently, the remuneration from the university is not included in your assessable income in Australia.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

XX XXXX 20XX

Relevant facts and circumstances

You were a tax resident of country A immediately before your visit to Australia.

On XX XXXX 20XX, you arrived in Australia on a visa.

The visa allows you to stay in Australia for 24 months from the date of arrival.

From XX XXXX 20XX to XX XXXX 20XX, you entered a contract for casual employment with a university as a research officer.

The research was commissioned by department A.

Your research aims to benefit the community as a matter of public interest. Your role as outlined in your duty statements involves:

•         Contributing to research project aiming to identify and report on effective subject A teaching and learning practices within XX education facilities, with the objective of informing subject A education policy and uplifting student attainment across the state.

You will work directly with a project manager, and report to the project head. The role will primarily involve data collection in education facilities, and/or quantitative and/or qualitative data analysis and associated report writing.

The income earned under your employment contract will be subject to taxation in country A.

Relevant legislative provisions

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

Income Tax Assessment Act 1997 subsection 6-10(5)

Income Tax Assessment Act 1997 subsection 6-20(2)

International Tax Agreements Act 1953 section 4

International Tax Agreements Act 1953 section 5

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).