ATO ID 2004/587: Assessability of honorarium received by a Canadian student visiting Australia
Date of decision: 16 June 2004
Year of income: 30 June 2004
Business line: Small Business/Individual Taxpayers

Issue
Is the honorarium paid in Australia by an Australian University to the taxpayer, a resident of Canada, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes. The honorarium payment received by the taxpayer, a resident of Canada, from an Australian University is assessable under subsection 6-5(3) of the ITAA 1997.

Facts
The taxpayer is a resident of Canada for income tax purposes and is not a resident of Australia for income tax purposes. The taxpayer is a full time student undertaking a course of study in Canada. As part of the course of study, the taxpayer accepted an invitation from the Australian University to fulfil a position as an occupational trainee in Australia. The Australian University pays the taxpayer an honorarium to cover their living expenses.

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. The honorarium received is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax on 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 Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that both Acts are read as one. Schedule 3 to the Agreements Act contains the convention between Australia and Canada (the Canadian Convention). Schedule 3A of the Agreements Act contains the protocol amending the Canadian Convention (the Canadian Protocol). The Canadian Convention and Canadian Protocol operate to avoid the double taxation of income received by Australian and Canadian residents. Article 15(1) of the Canadian Convention provides that remuneration derived by an individual who is a resident of Canada in respect of an employment shall be taxable only in Canada unless the employment is exercised in Australia. If the employment is exercised in Australia, any remuneration received may be taxable in Australia. Article 15(1) of the Canadian Convention does not apply as there is no employer-employee relationship between the taxpayer and the Australian University with any entitlement for remuneration. Article 20 of the Canadian Convention provides that payments received from sources outside Australia by a Canadian resident for the purposes of maintenance or education, while temporarily present in Australia solely for the purpose of education, are not taxable in Australia. Even though the taxpayer is a full time student, Article 20 of the Canadian Convention will not apply as the payment is from an Australian University. Article 21(2) of the Canadian Convention provides that items of income which are not specifically mentioned in the Canadian Convention that are received by a Canadian resident derived from sources in Australia, may be taxed in Australia and Canada. The taxpayer receives an honorarium from an Australian source. There are no specific Articles in the Canadian Convention that deal with the honorarium payment. Therefore Article 21(2) of the Canadian Convention will apply. Accordingly, the honorarium payment may be taxed in Australia and Canada. The honorarium payment received by the taxpayer, a resident of Canada, from an Australian University is assessable under subsection 6-5(3) of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 subsection 6-5(3)
Subject references: Canada Double tax agreements International tax Honoraria