Assessability of income received by a visiting South Korean Academic

Is the taxpayer's income as a visiting South Korean professor assessable income under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. The taxpayer's income as a visiting South Korean professor is not assessable income under subsection 6-5(3) of the ITAA 1997.

The taxpayer is a resident of South Korea and is a non resident for Australian taxation purposes.

The taxpayer is a professor.

The taxpayer will be in Australia for less than 2 years.

The taxpayer has been invited by a recognised Australian educational institution to visit Australia solely for the purposes of teaching and research. The taxpayer will be employed by the Australian educational institution.

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

Employment income is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. However, subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. There are no provisions listed in section 11-15 of the ITAA 1997 exempting the taxpayer's income earned while in Australia.

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 Agreement 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 22 to the Agreements Act contains the double tax agreement between Australia and the Republic of Korea (the Korean Convention). The Korean Convention operates to avoid the double taxation of income received by Australian and Korean residents.

Article 20 of the Korean Convention provides that a resident of Korea who visits Australia at the invitation of an educational institution, for a period not exceeding 2 years, solely for the purpose of teaching or research shall be taxable only in Korea.

As the taxpayer meets the requirements of Article 20 of the Korean Convention their income as visiting professor will be exempt from tax in Australia and therefore not assessable under subsection 6-5(3) of the ITAA 1997.