Edited version of private advice

Authorisation Number: 1052253259099

Date of advice: 20 May 2024

Ruling

Subject: Residency

Question

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

Answer

Yes.

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

Subsection 6-10(5) of the ITAA 1997 requires 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.

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 B is listed in section 5 of the Agreements Act.

The Convention between the Government of Australia and Country B for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidanceoperates to avoid the double taxation of income received by residents of one or both of the countries.

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 in Australia employed as a Research Fellow with an Australian university for a period not exceeding two years for the purpose of undertaking research that relates to a matter which is in the public interest, you are exempt from taxation in Australia in respect of the remuneration for that research, subject to that income being taxed in Country B.

Consequently, your employment income while working for the university is not included in your assessable in Australia.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 20 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

1 July 2023

Relevant facts and circumstances

You are a citizen and tax resident of Country B.

You are employed under a fixed term contract as a Postdoctoral Research Fellow with XX XX.

Your employment contract commended on XX XX 20XX and ends on XX XX 20XX.

You entered Australia on a temporary activity visa 408 (Research Activities).

The income earned under your employment with the Australian university will be subject to taxation in Country B.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 6-10

Income Tax Assessment Act 1936 section 6-20

International Tax Agreements Act 1953