Private ruling: On-line teaching income
Published: May 2015
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2014

Ruling: Questions and Answers | 1. Is your income from on-line teaching provided to Country A educational institutions assessable only in Australia? | Yes | 2. Is your income from on-line teaching to Country A educational institutions taxable only in Australia in view of the Double tax agreement between Country A and Australia? | Yes

Relevant facts and circumstances: You are an Australian resident for tax purposes. You conduct on-line educational courses, teaching students at various institutions in Country A and Australia. You advertise your services on the internet. You are not under any employment contract with any of the Country A institutions. The institutions contact you on an ad hoc basis to request you to provide a course. The course is provided most commonly as a weekly x hour lesson, with a lecture delivered as a pre-recorded video lecture or a live skype lecture. For the remaining time, the students complete on-line written exercises. You conduct your training from Australia. You do not have an office or any other business premises in Country A. You do not travel to Country A. At the end of the course you invoice the institution. You do not plan to go to Country A in future for any reason.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | International Tax Agreements Act 1953 | International Tax Agreements Act 1953 Section 4

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes the ordinary income derived from all sources, whether in or out of Australia, during the income year. Income from professional services is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining the liability to Australian tax on foreign sourced income received by a 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). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 and the ITAA 1997, so that those Acts are read as one. Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The Country A Agreement is listed in section 5 of the Agreements Act. The Country A Agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The Indian Agreement operates to avoid the double taxation of income received by residents of Australia and Country A. An Article in the Country A Agreement provides that income derived by an individual who is a resident of Australia in respect of professional services or other independent activities of a similar character shall be taxable only in Australia unless: (a) the individual has a fixed base regularly available to the individual in Country A for the purpose of performing the individual's activities, in which case the income may be taxed in Country A but only so much of it as is attributable to activities exercised from that fixed base; or (b) if the individual's stay in Country A is for a period or periods exceeding in the aggregate 183 days in any consecutive period of 12 months. In such a case, the income may also be taxed in Country A but only so much of it as is derived from the individual's activities performed in Country A. You will not be present in Country A for more than 183 days in any income year as you will not travel to Country A in future for any reason. Part (2) of the Article of the Country A Agreement provides that the term 'professional services' includes especially those performed in the exercise of independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants. The income derived by you for teaching constitutes 'professional services' income under Part (2) of the Article of the Country A Agreement. | Detailed Reasoning - Fixed base: We shall now consider if you have a fixed base in Country A. To assist in the interpretation of the Country A Agreement, reference is made to Taxation Ruling TR 2001/13 - Income tax: Interpreting Australia's Double Tax Agreements. The Commissioner's view in paragraphs 101 to 105 of Taxation Ruling TR 2001/13 is that, when interpreting a tax treaty recourse must be had to the Commentary on the OECD Model Tax Convention on Income and on Capital ('OECD Commentary'), including any subsequent revisions to that OECD Commentary, as a supplementary means of interpretation. The latest edition of the Model was published in 2014 The term 'fixed base' denotes a centre of activity of a fixed or permanent character from which such services can be carried out such as a physician's consulting room. You carry on your activities from Australia and do not have an office or any other business premises in Country A. Thus you do not have a fixed base in Country A. | Detailed Reasoning - Conclusion: You derive your income from on-line teaching provided to institutions in Country A. As you are a resident of Australia for tax purposes, and do not have a fixed base (such as an office) in Country A an Article of the Country A Agreement provides that your income will be assessable only in Australia, and as a consequence, your income will not be taxed in Country A.