Published on 01 Oct 11
by "THE TAX SPECIALIST" JOURNAL ARTICLE
The tax treatment of payments made by Australian residents to non-residents in respect of copyright depends on the proper characterisation of the payment, in particular, whether a payment is a "royalty". Australian law imposes a withholding tax on royalties paid to non-resident copyright owners. The Commissioner of Taxation accepts that consideration for an "outright sale" of copyright is not a "royalty", but contends that consideration for partial assignments of copyright constitutes "royalties" which are subject to withholding tax. The Commissioner's view is set out in TR 2008/7.
This article outlines the relevant provisions of the withholding tax and copyright regimes, identifies the "four pillars" on which the Commissioner's view is founded, and critically analyses those pillars. Based on that analysis, the author makes suggestions in relation to the future administration of the withholding tax regime, and steps that affected taxpayers should consider taking to protect their economic interests.