ATO ID 2004/561: Resident of the UK in receipt of Australian employment income: present in Australia for a period not exceeding 183 days
Date of decision: 29 June 2004
Year of income: Year ending 30 June 2004 Year ending 30 June 2005
Business line: Public Groups and International

Issue
Is the Australian sourced employment income received by a resident of the United Kingdom (UK) assessable income under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) where they are present in Australia for a period not exceeding 183 days?

Decision
Yes. The Australian sourced employment income received by a resident of the UK is assessable income under subsection 6-5(3) of the ITAA 1997 where they are present in Australia for a period not exceeding 183 days as their employer is an Australian resident.

Facts
The taxpayer is a resident of the UK and a non resident of Australia for taxation purposes. The taxpayer is present in Australia for a period not exceeding 183 days in the Australian income year. The taxpayer is employed in Australia and receives salary and wage income from an Australian University.

Reasons for decision
Summary: Subsection 6-5(3) of the ITAA 1997 provides that ordinary income derived by a non resident directly or indirectly from Australian sources, as well as other ordinary income included by a provision on a basis other than having an Australian source, is assessable. The salary and wages received by the taxpayer 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 agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates the Agreements Act with the ITAA 1997 so that the two Acts are read as one. Schedule 1 of the Agreements Act contains the double tax convention between Australia and the UK, the 2003 United Kingdom Convention (the UK Convention). The UK Convention operates to avoid the double taxation of income received by Australian and UK residents. Article 14 of the UK Convention outlines the treatment of income from employment. Article 14(1) of the UK Convention provides that salary and wages derived by a resident of the UK shall be taxable only in the UK unless the employment is exercised in Australia. If the employment is exercised in Australia then the income may also be taxed in Australia. Article 14(2) of the UK Convention provides that the income will be exempt from tax in Australia if: The taxpayer was present in Australia for a period not exceeding 183 days. The taxpayer's salary and wages were paid by an Australian resident employer and the exemption under Article 14(2) of the UK Convention will, therefore, not apply. Accordingly, the taxpayer will be assessable under subsection 6-5(3) of the ITAA 1997 on the salary and wages received from their Australian employer. Note: a credit for the Australian tax paid may be allowed against the UK tax payable on this income (Article 22(2) of the UK Convention).

Legislative references: Income Tax Assessment Act 1997 Subsection 6-5(3)
Related ATO interpretative decisions: ATO ID 2002/591
Subject references: Exempt income Double tax agreements Non resident individuals United Kingdom Salary & wages income