ATO ID 2003/510: Assessability of honorarium received by a South African professor visiting Australia
Date of decision: 23 June 2003
Year of income: Year ended 30 June 2004
Business line: Public Groups and International

Issue
Is the honorarium received by the taxpayer, a resident of South Africa, from an Australian university, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
No. Even though the honorarium received by the taxpayer, a resident of South Africa, from an Australian university is assessable under subsection 6-5(3) of the ITAA 1997, Article 14(2) of Schedule 42 to the International Tax Agreements Act 1953 (the Agreements Act) applies and the honorarium received is not taxable in Australia.

Facts
The taxpayer is a resident of South Africa and is not a resident of Australia for Australian income tax purposes. The taxpayer is a teacher and researcher at a South African university. The taxpayer accepted a two week appointment with a university in Australia to undertake teaching and research activities and received an honorarium.

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. The honorarium received is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. The taxpayer is a resident of South Africa, a country with which Australia has entered into a double tax agreement. Therefore, the double tax agreement between Australia and the Republic of South Africa contained in Schedule 42 to the Agreements Act (the South African Agreement) must be considered in determining whether the honorarium received by the taxpayer is taxable in Australia. Section 11ZG of the Agreements Act gives the South African Agreement the force of law in Australia. Subsection 4(1) of the Agreements Act provides that the ITAA 1997 must be read as one with the Agreements Act. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions with some limited exceptions (subsection 4(2) of the Agreements Act). Article 14(1) of the South African Agreement provides that income derived by a resident of South Africa in respect of professional services performed in Australia shall be taxable only in South Africa unless the taxpayer has a fixed base regularly available in Australia to perform those services. Article 14(2) of the South African Agreement defines the term 'professional services' to include services performed in the exercise of independent scientific, educational or teaching activities. The honorarium derived by the taxpayer from a university in Australia is in respect of 'professional services' under Article 14(2) of the South African Agreement. Consequently, as the taxpayer is a resident of South Africa for income tax purposes and they do not have a fixed base in Australia to perform their teaching and research activities, Article 14(1) of the South African Agreement applies and the honorarium is 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 Honoraria International Tax South Africa