Issue
Is the fee received by the taxpayer, a resident of New Zealand (NZ), for the provision of research services to an Australian university assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. The fee received by the taxpayer, a resident of NZ, for the provision of research services to an Australian university is not assessable under subsection 6-5(3) of the ITAA 1997.
Facts
The taxpayer is a resident of NZ and a non-resident of Australia for income tax purposes.
The taxpayer will be present in Australia for less than 183 days in the relevant year of income.
While in Australia, the taxpayer will carry out research activities for an Australian university.
The taxpayer will not have a fixed base in Australia for the purpose of performing the research activities.
The taxpayer is not an employee of the Australian university.
The taxpayer will receive a flat fee in return for the performance of the research activities.
Reasons for Decision
Subsection 6-5(3) of the 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.
Fees for personal services are 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 agreements 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.
Schedule 4 to the Agreements Act contains the double tax agreement between Australia and NZ (the NZ Agreement). The NZ Agreement operates to avoid the double taxation of income received by Australian and NZ residents.
Article 14(1) of the NZ Agreement provides that income derived by a NZ resident in respect of professional services or other independent activities shall be taxable only in NZ unless the services are performed in Australia and: (a) the individual is present in Australia for a period or periods exceeding in the aggregate 183 days in any 12 month period commencing or ending in the year of income concerned; or (b) a fixed base is regularly available to the individual for the purpose of performing the individual's activities.
Article 14(2) of the NZ Agreement defines "professional services" to include services performed in the exercise of independent scientific, literary, artistic, educational or teaching activities as well as in the performance of the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.
The services provided by the taxpayer constitute professional services for the purposes of Article 14(2) of the NZ Agreement.
The taxpayer is a resident of NZ who is present in Australia for less than 183 days in the relevant year of income and does not have a fixed base regularly available for the purpose of performing their activities in Australia.
Therefore, the income received by the taxpayer in respect of the provision of professional services is taxable only in NZ under Article 14(1) of the NZ Agreement and is not included in the taxpayer's assessable income under subsection 6-5(3) of the ITAA 1997.