Assessability of Australian sourced salary and wages received by a resident of Norway

Is the taxpayer, a resident of Norway, assessable on their Australian sourced salary and wages under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes. The taxpayer, a resident of Norway, is assessable on their Australian sourced salary and wages under subsection 6-5(3) of the ITAA 1997.

The taxpayer is a resident of Norway and is a non resident for Australian tax purposes.

The taxpayer received salary and wages from an Australian employer under a short term contract of employment. The employer was a resident of Australia and not a resident of Norway.

The taxpayer was present in Australia only in the current income year, and this was for a period of 183 days or less.

Subsection 6-5(3) of the ITAA 1997 provides that ordinary income derived by a non resident directly or indirectly from Australian sources, as well as other ordinary income included by a provision on a basis other than having an Australian source, is assessable.

The salary and wages received by the taxpayer were ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997.

In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act).

Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions).

Schedule 23 of the Agreements Act contains the double tax agreement between Australia and Norway (the Norwegian Convention). The Norwegian Convention operates to avoid the double taxation of income received by Australian and Norwegian residents.

Article 15 of the Norwegian Convention deals with dependent personal services. The Article provides that salary, wages and other similar remuneration derived by a Norwegian resident shall be taxable only in Norway unless the employment is exercised in Australia. If the employment is exercised in Australia then the income may also be taxed in Australia.

Paragraph (2) of Article 15 of the Norwegian Convention provides that the income will be exempt from tax in Australia if: • the taxpayer is present in Australia for a period or periods not exceeding in the aggregate 183 days in the Australian year of income or in any two consecutive years of income; and • the remuneration is paid by or on behalf of an employer who is a resident of Norway; and • the remuneration is not deductible in determining the profits of a permanent establishment or a fixed base which the employer has in Australia.

However, despite the above, if the income is exempt from tax in Norway then Australia may still tax the income.

Although the taxpayer was present in Australia for less than 183 days, as their salary and wages were not paid by an employer who was a resident of Norway, the exemption under paragraph (2) of Article 15 of the Norwegian Convention will not apply.

The taxpayer will therefore be assessable under subsection 6-5(3) of the ITAA 1997 on the salary and wages received. Note: A deduction for the Australian tax paid will be allowed against the Norwegian tax payable on this income (paragraph (2) of Article 25 of the Norwegian Convention).