Edited version of private ruling

Authorisation Number: 1011891067541

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Ruling

Subject: Assessability of postdoctoral fellowship income

Question and answer:

Is the income you receive while conducting academic research in Australia assessable income in Australia?

No.

This ruling applies for the following period:

Year ending 30 June 2012

The scheme commenced on:

1 July 2011

Relevant facts and circumstances

You are a research associate at a University in Australia.

You are based overseas.

You will be in Australia less than 2 years.

Relevant legislative provisions

Income tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 6-15
International Tax Agreements Act 1953 Section 4

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) includes in your assessable income, any ordinary income derived from Australian sources.

Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income.

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 agreements.

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 X Agreement is listed in section 5 of the Agreements Act.

The Country X agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The Country X agreement operates to avoid the double taxation of income received by residents of Australia and Country X.

Article Y(1) of the Country X Agreement provides that where a professor or teacher who is a resident of Country X visits Australia for a period not exceeding two years for the purpose of carrying out research at an Australian university, any income received for the research shall be exempt from tax in Australia to the extent that it is taxable in Country X.

However Article Y(2) of the Country X agreement provides that the income received for the research is not exempt where the research is undertaken primarily for the private benefit of a specific person or persons.

In your case you came from Country X to Australia on X July 20XX. You are based in Country X.

You are currently working at an Australian university conducting research which you commenced on 5 July 2010 and will finish in June 2012. Your income from the university will be taxed in Country X. Additionally, the research you are conducting is not for the benefit of a specific person or persons.

As such, you meet the requirements of Article Y(1) and Article Y(2) of the Country X Agreement. Accordingly, the income you receive for the research undertaken is exempt from tax in Australia to the extent to which it is subject to tax in Country X.

Therefore, the income you receive for research undertaken in Australia will not be assessable under section 6-5 of the ITAA 1997.