Edited version of private advice

Authorisation Number: 1052165860968

Date of advice: 6 September 2023

Ruling

Subject: Assessable income - research activities

Question

Is the income you derive under the fixed term contract of employment with the university exempt from tax in Australia?

Answer

Yes.

The scheme commenced on:

XX June 20XX

Relevant facts and circumstances

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

You are a researcher employed by a university.

Your occupational category of employment is academic research.

Your research aims to benefit the community as a matter of public interest.

You are within a fixed term of employment which will end within 2 years.

You were a resident for tax purposes of Country A before your arrival in Australia.

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

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 6-5

Income Tax Assessment Act 1936 Section 6-20

International Tax Agreements Act 1953 Section 4

International Tax Agreements Act 1953 Section 5

Reasons for decision

Assessable income

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 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 Double Tax Agreement

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

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.