Taxation Determination

TD 2001/22

Income tax: Is salary paid to a German resident employed as an assistant teacher in an Australian school exempt income?

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  Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series. The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953.

FOI status:

1. Yes, the salary is exempt income in Australia if all of the requirements of Paragraph 19(1) of Schedule 9 (the German Agreement) to the International Tax Agreements Act 1953 are met.

2. If the salary is exempt income, subsection 12-1(1) of Schedule 1 of the Taxation Administration Act 1953 says that the employer is not required to withhold an amount of tax.

3. Some Australian schools employ residents of Germany to assist in the teaching of the German language. The position in the school that the resident of Germany will hold may be described as assistant teacher or language assistant. Invariably there will be a class teacher who holds Australian teaching qualifications and the assistant teacher will work closely with and under the directions of that class teacher. While the assistant teacher may not have the full range of professional responsibilities that a class teacher will have, the assistant teacher is recognised by teachers, parents and students as teaching within the school.

4. Paragraph 19(1) of Schedule 9 to the International Tax Agreements Act 1953 says:

Remuneration which a professor or teacher who is a resident of a Contracting State and who visits the other Contracting State for a period not exceeding two years for the purpose of carrying out advanced study or research or of teaching at a university, college, school or other educational institution receives for those activities shall not be taxed in that other State.

5. To obtain the 'visiting teacher' exemption from Australian income tax, the assistant teacher must satisfy the following requirements:

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Be a teacher in Germany. This is a question of fact. If a person was employed as a teacher in Germany or had recently qualified to be employed as a teacher immediately prior to coming to Australia, we accept that the person is a teacher in Germany. If a person who is qualified to be a teacher in Germany had ceased to be teacher sometime before coming to Australia, the person does not meet this requirement;

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Be a resident of Germany. This is a question of fact. German citizenship is not sufficient, the person must be a resident of Germany;

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Visit Australia for a period not exceeding two years. This is a question of fact which can ordinarily be determined during the visit itself by reference to the period of time that the entry visa permits the person to be in Australia. The two year period refers to the total time of the visit. If during the period of teaching or after it has finished, an intention is formed to remain in Australia for a period that in total (with the earlier period) exceeds two years, the teaching income derived before the person's intention had changed will remain exempt. The exemption will not apply to any teaching income earned after the person's intention changed;

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The purpose of the visit is teaching at a university, college school or other educational institution. This is a question of fact that can be determined by reference to any employment contracts the person had entered prior to coming to or soon after arrival in Australia. Sightseeing and other tourist activities between school terms are not considered to impact upon the purpose of the visit; and

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The remuneration received must be for the teaching activities. The purpose for which a person is remunerated is a question of fact. The job title that the person holds in the school is not relevant. The professional opinion of a school principal, deputy principal or a senior officer in the Education Department that an assistant teacher is remunerated for teaching in a school will generally be accepted as evidence.

Example 1

6. Dagmar completed her University and State examinations in 2000 and is qualified to teach in German schools. Dagmar considered that it would enhance her career prospects if she gained teaching experience outside of Europe. In November 2000 Dagmar entered into an employment contract with the Education Department of an Australian State for the 2001 and 2002 academic years. Under the terms of the contract she will be employed as an assistant teacher in a State school where she will assist the class teacher in the teaching of the German language to students. Dagmar entered Australia on 4 January 2001. Her entry visa requires that she leave Australia on or before 3 January 2003. Dagmar has and will continue to see Australia as a tourist between school terms.

The remuneration paid to Dagmar for teaching in the State school is not subject to tax in Australia. The State school is not required to withhold an amount of tax from the remuneration.

Example 2

7. Heinrich is a teacher in Germany. Heinrich sought advice from the Australian Embassy on teaching opportunities in Australia. After being advised that his skills and qualifications were in demand in certain Australian States, Heinrich wrote to the Education Department of the State where he preferred to teach, informing the Department that he would arrive in Australia in early December 2000 and would like to teach in a school for one academic year. Soon after his arrival, Heinrich was interviewed by the Department and accepted a teaching position for the 2001 academic year. Heinrich then toured parts of Australia and took up his teaching position in February 2001. Heinrich intends to return to Germany in February 2002.

The remuneration paid to Heinrich for teaching in the State school is not subject to tax in Australia. The State school is not required to withhold an amount of tax from the remuneration.

Example 3

8. Silke is a teacher in Germany. Silke arrived in Australia in October 2000 and commenced to tour Australia as a backpacker. Silke has earned income picking fruit whilst backpacking around Australia. In late January 2001, Silke met Dagmar and Heinrich and then successfully applied for a teaching position in an Australian school. Silke intends to return to Germany in July 2002.

Silke did not enter Australia for the purpose of teaching. The remuneration paid to Silke for teaching in the State school is subject to tax in Australia. The State school is required to withhold an amount of tax from the remuneration.

Example 4

9. Helmut is a teacher in Germany. Helmut arrived in Australia on 25 January 2001 to undertake a teaching contract at an Australian school for two academic years. In August 2002, Helmut booked his return flight to Germany to depart Australia on 23 January 2003. On Christmas Day, Helmut is invited by Australian friends to join them on a 2 week bush walking trip in February 2003. Helmut extends his visa, completes the bush walking trip and departs Australia on 18 February 2003.

The remuneration paid to Helmut for teaching in the Australian school is not subject to tax in Australia. The school is not required to withhold an amount of tax from the remuneration. On the evidence available, as Helmut did not form an intention to remain in Australia for a period exceeding two years until after completing his teaching contract, no part of his teaching income is taxable in Australia.

Commissioner of Taxation
3 October 2001

Not previously issued in draft form

References

ATO references:
NO T2001/013367

Related Rulings/Determinations:

TR 92/1
TR 92/20
TR 97/16
IT 2577

Subject References:
double tax agreement
double tax convention
exempt income
international tax
teachers
withholding taxes

Legislative References:
ITAA 1953 19(1), Schedule 9
TAA 1953 12-1(1), Schedule 1
TAA 1953 Part IVAAA