AUSTRALIA: Payments to non-residents authors are subject to royalty withholding tax

The Australian Taxation Office (hereafter ATO) has recently published its Taxation Determination TD 2006/10 on the treatment of payments to non-resident authors. According to this public ruling a payment to a non-resident author for the use of, or the right to use, the author?s copyright is a royalty as defined in Subsection 6(1) of the ITAA 1936. In its explanation to TD 2006-10 the ATO explains that ?in the case where an article is submitted to one or more potential publishers and there is nothing at that time that evidences something other than an offer to allow use of the copyright, a subsequent payment will, prima facie, exhibit the characteristics of a royalty.? It is also stipulated that submitting an invoice for the assignment of the Australian copyright to the publisher for a short period does not mean that the publisher will pay an amount other than a royalty.

The Australian withholding tax rate is generally 30%, under many tax treaties that have been concluded by Australia the withholding tax rate on royalties is limited to 10%.