ATO ID 2005/254: Austrian resident working in Australia for a period of more than 183 days in a year of income
Date of decision: 27 July 2005
Year of income: Year ended 30 June 2005
Business line: Public Groups and International

Issue
Is an Austrian resident's employment income from an Austrian employer assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) where the taxpayer performed the duties in Australia for more than 183 days in an income year?

Decision
Yes. The employment income is assessable in Australia where the non-resident worked in Australia for more than 183 days in an income year.

Facts
The taxpayer is an Austrian resident who is employed by an Austrian company. The taxpayer was sent to Australia by the Austrian company to work with the Australian subsidiary for more than 183 days in the 2004-05 income year. The Austrian company paid for the taxpayer's income whilst the taxpayer was engaged in employment in Australia. The taxpayer is not an Australian resident for tax purposes. The taxpayer's salary will be subject to tax in Austria.

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 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. In determining the liability to tax on employment income received by a non-resident, 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). Schedule 27 to the Agreements Act contains the tax treaty between Australia and the Republic of Austria (the Austrian Agreement). The Austrian Agreement operates to avoid the double taxation of income received by Australian and Austrian residents. Article 15(1) of the Austrian Agreement provides that salary and wages derived by an Austrian resident for employment exercised in Australia may be taxed in Australia. However Article 15(2) of the Austrian Agreement provides that the income will only be taxed in the Republic of Austria if: ... (a) the recipient is present in that other State for a period or periods not exceeding in the aggregate 183 days in the year of income or the taxable year, as the case may be, of that other State (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of that other State (c) the remuneration is not deductible in determining taxable profits of a permanent establishment, a fixed base or a trade or business which the employer or company has in that other State; and (d) the remuneration is, or upon the application of this Article will be, subject to tax in the first-mentioned State. As the taxpayer had performed the duties in Australia for more than 183 days, Article 22(2)(a) of the Austrian Agreement is not satisfied. Australia will retain the right to tax the employment income under Article 22(1) of the Austrian Agreement, the income will be deemed to have an Australian source. Consequently the employment income is assessable under section 6-5(2) of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 section 6-5
Case references: Federal Commissioner of Taxation v. French (1957) 98 CLR 398 (1957) 11 ATD 288 (1957) 7 AITR 76
Related public rulings and determinations: Taxation Ruling TR 98/17
Subject references: Austria Double tax agreement International tax