Assessability of income derived by a Singapore resident to conduct research in Australia

Is the salary and wages income from employment performed in Australia by a resident of Singapore assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes. The salary and wages income from employment performed in Australia by a resident of Singapore is assessable under subsection 6-5(3) of the ITAA 1997.

The taxpayer is a citizen and resident of Singapore.

The taxpayer will be employed by an Australian university to conduct academic research as a Research Fellow with a team of other researchers (colleagues).

The taxpayer arrived in Australia at the beginning of the 2005-06 income year.

The taxpayer has no intention to reside permanently in Australia.

The taxpayer will stay in Australia for a few months (less than 183 days) conducting research work and then will leave Australia for 12 months (only returning to Australia for a short visit during this time).

During the 2006-07 income year the taxpayer intends to return to Australia for a few months (less than 183 days) to finish writing a book with colleagues at the university.

The taxpayer will be renting an apartment on the university campus and the taxpayer's salary and wages will be paid by the university.

The taxpayer is not performing services in Australia for or on behalf of the Singapore-resident employer and does not intend to work for the former employer in Singapore on their return to Singapore.

The taxpayer's salary will be deposited in a bank account in Australia.

The taxpayer has bank accounts, shares in companies and a flat in Singapore and receives rent, interest and dividends from these investments.

The taxpayer has social connections with family and friends in Singapore.

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 and other ordinary income that a provision includes as assessable income on some basis other than having an Australian source.

Salary and wages are ordinary income under subsection 6-5(3) of the ITAA 1997.

The source of remuneration for services rendered will depend on the facts of each case. However, the source is generally the place where those services are performed (see Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76) where Williams J stated at CLR 414; ATD 296; AITR 85 that: ......the locality of the source of income derived from personal exertion in the capacity of employee or in relation to any services rendered surely must be where such personal exertion took place, and the locality of the source of the proceeds of any business where the activities of the business are carried on....

The salary and wages income received by the taxpayer has an Australian source having regard to the significance attributable to the place where the services are performed.

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

The taxpayer is a resident of Singapore, a country with which Australia has entered into a tax treaty. Therefore, the tax treaty between Australia and Singapore (the Singapore Agreement) and the protocols to that agreement contained in Schedule 5 and 5A of the Agreements Act respectively must be considered in determining whether the salary and wages paid to the taxpayer is taxable in Australia.

Section 7 of the Agreements Act gives the Singapore Agreement the force of law in Australia. Subsection 4(1) of the Agreements Act provides that the Income Tax Assessment Act 1936 and ITAA 1997 must be read as one with the Agreements Act.

Under Article 11 of the Singapore Agreement remuneration in respect of the performance of personal (including professional) services derived by a resident of one country is subject to tax only in that country unless the services are performed in the other country, in which case the income is attributed with a source in, and can be taxed by, the other country. Accordingly, the remuneration derived by the Singapore resident taxpayer from performing professional services in Australia has an Australian source and can be taxed in Australia.

However, the power given by Article 11 of the Singapore Agreement to the source country to tax income from personal services performed by a resident of the other country in the source country is subject to the operation of Article 12 of the Singapore Agreement.

Article 12 of the Singapore Agreement exempts such personal services income from taxation in the country where the services are performed provided the services are performed during a short term visit and certain other conditions are satisfied. The taxpayer's facts indicate that the services have been performed during short periods (less than 183 days).

However, the taxpayer has also stated that the services were not performed for or on behalf of a Singapore resident (company or individual). This fails to satisfy the second condition under Article 12 of the Singapore Agreement which stipulates that the services should be performed for or on behalf of a Singapore resident (company or individual). Therefore, the exemption under this Article is not available to the taxpayer.

Accordingly, the salary and wages received by the taxpayer from employment performed in Australia by a resident of Singapore, even during short visits (less than 183 days), is assessable in Australia under subsection 6-5(3) of the ITAA 1997.

N.B.: Taxation Ruling TR 2003/11 which provides the interpretation of the general exclusion provision of the Dependent Personal Services Article does not apply to the Singapore Agreement as Article 12 of this Agreement does not refer to 'in respect of employment' or 'employer' in describing the provisions of the Article - see [F5] of TR 2003/11.