Taxpayer Alert TA 2003/4: Assignment of Australian Copyright on Articles Prepared by Non-Resident Authors
Date of issue: 20 October 2003
Status: Current


Description: This Taxpayer Alert describes an arrangement involving a purported assignment of Australian copyright on articles prepared by non-resident authors. It is argued that the payments made to the non-resident authors are not subject to Royalty Withholding Tax (RWT). | The alert applies to arrangements having the following features: 1. A non-resident writes an article which is submitted to an Australian publisher for publication. 2. After publication the non-resident author sends an invoice to the Australian publisher. 3. The invoice is endorsed with words to the effect that the non-resident author assigns the Australian copyright in the article to the Australian publisher for a short period of time, say three months. 4. The non-resident author and the Australian publisher also agree that no RWT will be deducted from the payment to the author as they argue that the payment is for the assignment of the ownership of the copyright in the article rather than for the use of that copyright. 5. The Australian publisher makes payment to the non-resident author for the purported purpose of acquiring the copyright in the article, rather than as a royalty for its use, and does not deduct and remit RWT. | 1. A non-resident writes an article which is submitted to an Australian publisher for publication. 2. After publication the non-resident author sends an invoice to the Australian publisher. 3. The invoice is endorsed with words to the effect that the non-resident author assigns the Australian copyright in the article to the Australian publisher for a short period of time, say three months. 4. The non-resident author and the Australian publisher also agree that no RWT will be deducted from the payment to the author as they argue that the payment is for the assignment of the ownership of the copyright in the article rather than for the use of that copyright. 5. The Australian publisher makes payment to the non-resident author for the purported purpose of acquiring the copyright in the article, rather than as a royalty for its use, and does not deduct and remit RWT. | The ATO considers that the arrangement outlined above gives rise to taxation issues which include: a) The validity of the copyright assignment; b) Whether the payment for the purported assignment of copyright falls within the definition of a royalty in subsection 6(1) of the Income Tax Assessment Act 1936 ('ITAA 1936'); c) Whether the failure to deduct and remit RWT results in a liability for the Australian publisher; and d) Whether Part IVA of the ITAA 1936 applies as it appears the dominant purpose of entering the arrangement is to obtain a tax benefit through avoiding RWT. | a) The validity of the copyright assignment; b) Whether the payment for the purported assignment of copyright falls within the definition of a royalty in subsection 6(1) of the Income Tax Assessment Act 1936 ('ITAA 1936'); c) Whether the failure to deduct and remit RWT results in a liability for the Australian publisher; and d) Whether Part IVA of the ITAA 1936 applies as it appears the dominant purpose of entering the arrangement is to obtain a tax benefit through avoiding RWT. | The Australian Taxation Office is examining these arrangements.





Related documents: TD 2006/10. | IT 2660 | PS 2008/15 | ITAA 1936 Subsection 6 (1) | ITAA 1936 Section 128B | ITAA 1936 Part IVA | ITAA 1997 Section 15-20 | ITAA 1997 Section 995-1 | TAA 1953 Section 16-25 | TAA 1953 Section 16-30

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