This Draft Ruling, released on Wed 23.5.2012, gives the ATO’s views on who is the “employer” for the purposes of the short-term visit exception under the Income from Employment Article, or its equivalent, of Australia’s tax treaties.
Under Australia’s tax treaties, the general rule is that employment income is taxed in the Contracting State of which the employee is a resident, unless the services are rendered in the other Contracting State. In such a case, the other State has taxing rights unless:
- the employee is present in that State for less than 183 days in aggregate in any 12-month period commencing or ending in the year of income of that State,
- the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and
- the remuneration is not borne by a permanent establishment, which the employer has in the other State.
This exception is known as the “short-term visit” exception.
This Draft Ruling considers the meaning of the term “employer” for the purposes of the short-term visit exception. Unless a particular treaty requires the term to have a different meaning, the term “employer” is considered to take its meaning from Australian domestic law and the context, object and purpose of the short-term visit exception. The Draft Ruling states that the “employer” is the enterprise to which a non-resident individual renders his or her services in what would be considered an employment relationship.
The Draft Ruling then lists various factors that are relevant in determining whether an employment relationship exists in respect of particular arrangements and provides 4 examples illustrating an analysis of those factors.
As a consequence of the release of Draft Ruling TR 2012/D4, Taxation Ruling TR 2003/11 has been withdrawn with effect from Wed 23.5.2012.
COMMENTS are due by 6 July 2012. ATO contacts: Bart Commandeur – Tel: (03) 9285 1403; Email: Bart.Commandeur@ato.gov.au. Kevin O’Shaughnessy – Tel: (03) 9285 2571; Email: Kevin.O’ Shaughnessy@ato.gov.au.
[LTN 98, 23/5]