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Edited version of your private ruling
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Ruling
Subject: Foreign income
Question
Are you assessable on your fellowship awarded by the foreign organisation?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
The scheme commences on:
1 July 2010
Relevant facts and circumstances
You are a resident of Australia for taxation purposes.
You are a citizen of Country A.
You have been awarded a fellowship from an organisation based in Country A.
The fellowship is payable monthly.
The fellowship is not subject to tax in Country A.
There is no employer-employee relationship between the foreign organisation and yourself as the fellowship holder.
You are not a full time student.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 6-10
Income Tax Assessment Act 1997 Section 51-10
Reasons for decision
Section 6-5 and section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary and statutory income derived directly and indirectly from all sources, whether in or out of Australia, during the income year.
Ordinary income has generally been held to include three categories, namely income from rendering personal services, income from property and income from carrying on a business.
Whether or not a particular amount is ordinary income depends on the nature and character of the receipt in the hands of the taxpayer. Characteristics of what is ordinary income have evolved from case law and include:
§ receipts that are earned,
§ are expected,
§ are relied upon, and
§ have an element of periodicity, recurrence or regularity.
In your case, you receive fellowship payments which are paid monthly for the purpose of supporting you financially while you complete your research project.
The monthly payments you receive are considered to be ordinary income, being periodical receipts that are expected and relied upon by you.
The fellowship payments will therefore form part of your assessable income.
Double tax agreement
In determining liability to Australian tax on foreign sourced income received by a resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement (DTA).
Australia has signed a DTA with Country A (the Agreement).
The Agreement operates to avoid the double taxation of income received by Australian and Country A's residents.
There is no provision in the DTA between Country A and Australia that applies to prevent taxation of the fellowship payment in Australia.
Therefore, the fellowship payments you receive are assessable in Australia and will need to be included in your income tax return.