Assessability of income derived in Austria by an Australian university lecturer and researcher

Is the contract income earned by an Australian lecturer and researcher from a university in Austria assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes. The contract income earned by the Australian lecturer and researcher from a university in Austria is assessable under subsection 6-5(2) of the ITAA 1997.

The taxpayer is a resident of Australia for income tax purposes.

The taxpayer held the position as a lecturer and researcher at an Australian university.

The taxpayer accepted a one month contract with a university in Austria to undertake teaching and research activities for a fixed sum of money.

The taxpayer did not keep a fixed base in Austria to undertake the teaching and research activities.

Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

In determining liability to Australian tax on foreign sourced income, 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. In the event of inconsistent provisions, the Agreements Act overrides the ITAA 1997 (except in some limited situations).

Schedule 27 of the Agreements Act contains the double tax agreement between Australia and the Republic of Austria (the Austrian Agreement). The Austrian Agreement operates to avoid double taxation of income received by Australian and Austrian residents.

Paragraph (1) of Article 14 of the Austrian Agreement provides that income derived by a resident of Australia in respect of professional services performed in Austria shall be taxable only in Australia unless the taxpayer has a fixed base regularly available in Austria to perform those services.

Paragraph (2) of Article 14 of the Austrian Agreement defines the term 'professional services' to include services performed in the exercise of independent scientific, educational or teaching activities.

The contract income derived by the taxpayer from a university in Austria is in respect of 'professional services' under paragraph (2) of Article 14 of the Austrian Agreement.

As the taxpayer is a resident of Australia for income tax purposes and they do not have a fixed base in Austria to perform their teaching and research activities, the income received from the university in Austria is assessable under subsection 6-5(2) of the ITAA 1997.