ATO ID 2003/829: Assessability of salary and wage income - visiting Polish professor
Date of decision: 22 August 2003
Year of income: Year ending 30 June 2003
Business line: Small Business/Individual Taxpayers

Issue
Is the taxpayer, a resident of Poland, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) on salary and wage income earned as a visiting professor?

Decision
No. The taxpayer, a resident of Poland, is not assessable under subsection 6-5(3) of the ITAA 1997 on salary and wage income earned as a visiting professor.

Facts
The taxpayer is a resident of Poland and a non resident of Australia for taxation purposes. The taxpayer is a professor in Poland. The taxpayer will be in Australia for less than two years for the purpose of carrying out research at an Australian educational institution. The taxpayer receives salary and wage income for this research work. This income will be taxable in Poland

Reasons for decision
Summary: 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. Salary and wages 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. Subsection 4(2) of the Agreements Act provides that the Agreements Act overrides the ITAA 1997 where there are inconsistent provisions (apart from Australia's general anti-avoidance rules and certain provisions dealing with limitations of tax credits). Schedule 36 to the Agreements Act contains the double tax agreement between Australia and Poland (the Polish Agreement). The Polish Agreement operates to avoid the double taxation of income received by Australian and Polish residents. Article 21 of the Polish Agreement provides that where: any remuneration the person receives for such teaching, advanced study or research shall be exempt from tax in Australia to the extent to which that remuneration is, or upon the application of the Article will be, subject to tax in Poland. As the taxpayer meets the requirements of Article 21 of the Polish Agreement the salary and wage income will be exempt from tax in Australia and therefore not assessable under subsection 6-5(3) of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 subsection 6-5(3)
Subject references: Academic staff Double tax agreements Exempt income Poland