INCOME TAX
INCOME DERIVED FROM SOURCES WITHIN AUSTRALIA: WHETHER RENT RECEIVED BY ENGLISH COMPANY FOR HIRE OF AUSTRALIAN-REGISTERED VESSEL REQUISITIONED BY COMMONWEALTH CONSTITUTES INCOME DERIVED FROM SOURCE WITHIN AUSTRALIA: EFFECT OF REQUISITIONING ON SOURCE OF INCOME
INCOME TAX ASSESSMENT ACT 1915, s. 10(1)
The Acting Commissioner of Taxation has forwarded the following memorandum for advice:
In your advising of 23 February last(1) you stated in regard to foreign-owned ships requisitioned by the Commonwealth Government as transports, that if the owner was not resident in the Commonwealth and the vessel was taken by the Government by force majeure, the ship owned cannot be regarded as carrying on a business in the Commonwealth. The Department has therefore treated the hire money in such cases as not subject to tax.
A case has now arisen in which the head office of a company which owned a vessel commandeered by the Commonwealth Government as a transport is in England, but the company has a branch office in Australia. The vessel in question is on the Australian register and has been used for years in trading on the Australian coast.
Notice of intention to take over the vessel was given to the company in Australia. The hire money is paid to the company in England.
I am in doubt regarding the place where this vessel is owned but incline to the view that the hire money arises by virtue of a trade carried on in Australia and that it is taxable in full.
I shall be glad to be favoured with your advice on the point.
I do not think that the hire money can be regarded as arising from a trade carried on in Australia. The Commonwealth Government, by force majeure, has requisitioned the vessel, and the company can no longer be regarded as carrying on any trade with that vessel. She has been taken out of the company's service by forces over which it had no control.
The fact that the vessel was on the Australian register and was used in trading on the Australian coast is not material to the question under consideration, even though that fact may have been the main cause of the requisitioning of the vessel.
The income now derived from the vessel is not derived from any trade or business carried on in Australia, but from the ownership of the vessel, consequent on its being requisitioned.
The source of the income which is derived by virtue of the ownership of the vessel by a company whose head office is not in Australia is not a source within Australia.
In my opinion, the company is not taxable on the hire money.
[Vol. 15, p. 374]
(1)Openion No. 764.