Income Tax Laws Amendment (Royalties) Act 1976

Administered by Department of the Treasury

Legislation au C2004A01573 Not in force Act

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INCOME TAX LAWS AMENDMENT (ROYALTIES) ACT 1976

No. 143 of 1976

An Act relating to the Taxation of Royalties.

BE IT ENACTED by the Queen, and the Senate and House of Representatives of the Commonwealth of Australia, as follows: —

PART I—PRELIMINARY

Short title.

1. This Act may be cited as the Income Tax Laws Amendment (Royalties) Act 1976.

Commencement.

2. This Act shall come into operation on the day on which it receives the Royal Assent.

PART II—AMENDMENTS OF THE INCOME TAX ASSESSMENT ACT

References to Income Tax Assessment Act.

3. The Income Tax Assessment Act 1936 is in this Part referred to as the Principal Act.

Interpretation.

4. Section 6 of the Principal Act is amended by omitting from sub-section (1) the definition of “royalty” and substituting the following definition:—

“‘royalty’ or ‘royalties’ includes any payment, whether periodical or not, and however described or computed, to the extent to which it is paid as consideration for—

(a) the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trademark, or other like property or right;

(b) the use of, or the right to use, any industrial, commercial or scientific equipment;

(c) the supply of scientific, technical, industrial or commercial knowledge or information;

(d) the supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling the application or enjoyment of, any such property or right as is mentioned in paragraph (a), any such equipment as is mentioned in paragraph (b) or any such knowledge or information as is mentioned in paragraph (c); or

(e) the use of, or the right to use—

(i) motion picture films;

(ii) films or video tapes for use in connexion with television; or

(iii) tapes for use in connexion with radio broadcasting;”.

Source of royalty income derived by a non-resident.

5. Section 6c of the Principal Act is amended by inserting in sub-section (2), after the word “of”, the words “paragraph (r) of section 23 and”.

Certain items of assessable income.

6. Section 26 of the Principal Act is amended by omitting paragraph (f) and substituting the following paragraph:—

“(f) any amount received as or by way of royalty other than an amount that—

(i) but for the definition of ‘royalty’ in sub-section (1) of section 6 would not be such an amount; and

(ii) is not ‘income’ within the ordinary meaning of that expression;”.


PART III—AMENDMENTS OF THE INCOME TAX (INTERNATIONAL AGREEMENTS) ACT

Interpretation.

7. Section 3 of the Income Tax (International Agreements) Act 1953 is amended—

(a) by omitting from sub-section (1) the definition of “the Assessment Act” and substituting the following definition:—

“‘the Assessment Act’ means the Income Tax Assessment Act 1936;”; and

(b) by adding at the end thereof the following sub-sections:—

“(8) Where, by virtue of a provision of an agreement, the expression ‘royalties’ as used in, or in a particular provision of, that agreement has the meaning that that expression has under the law of Australia relating to income tax, that expression has, for the purposes of that agreement or of that particular provision, as the case may be, the meaning that that expression has by virtue of sub-section (1) of section 6 of the Assessment Act.

“(9) Where, by virtue of a provision of an agreement, expressions used in, or in a particular provision of, that agreement and not otherwise defined for the purposes of that agreement or of that particular provision have the meanings that those expressions have under the law of Australia relating to income tax, sub-section (8) does not affect the interpretation of that agreement or of that particular provision, as the case may be, in relation to the meaning of expressions other than the expression ‘royalties’.”.

PART IV—MISCELLANEOUS

Application of amendments.

8. The amendments made by this Act apply, and shall be deemed to have applied, to income derived on or after 1 July 1968 other than income in respect of which an assessment was made before 5 July 1976.

Amendments not to affect interpretation of previous law.

9. It is hereby declared that the amendments made by this Act are enacted for the avoidance of doubt and, in particular, shall not be taken as implying that the definition of the expression “royalty” in sub-section 6(1) of the Income Tax Assessment Act 1936 as in force at any time during the period that commenced on 1 July 1968 and ended immediately before the commencement of this Act did not apply for the purposes of the application of the Income Tax Assessment Act 1936, or of the Income Tax (International Agreements) Act 1953, as amended and in force at any time during that period—

(a) in relation to payments made to residents of countries other than the United Kingdom; or

(b) in relation to the expression “royalties” as used in a provision of an agreement with respect to taxes on income entered into between Australia and a country other than the United Kingdom where that expression is not given by that agreement a different meaning in that provision.

 

Overview

The Income Tax Laws Amendment (Royalties) Act 1976, enacted by the Commonwealth Parliament, addresses the need to clarify and expand the definition of royalties for income tax purposes. This Act aims to ensure that all forms of payments considered royalties under Australian tax law are comprehensively captured, regardless of how they are described or computed. By amending the Income Tax Assessment Act 1936 and the Income Tax (International Agreements) Act 1953, the Act provides a broader interpretation of what constitutes a royalty, including payments for the use of intellectual property, equipment, knowledge, and other ancillary services. The policy objective is to provide clarity and consistency in the taxation of royalties, both domestically and in the context of international tax agreements.

Scope and Application

The Income Tax Laws Amendment (Royalties) Act 1976 is a Commonwealth statute that amends the definition and taxation treatment of royalties under the Income Tax Assessment Act 1936. This Act applies to the income tax law of Australia and affects entities and individuals who derive income from royalties, regardless of whether they are residents or non-residents. The amendments clarify the scope of what constitutes a royalty for tax purposes, including any payments made for the use or right to use intellectual property, equipment, or knowledge, and ancillary assistance related to these uses. The Act's amendments extend to any international agreements concerning income tax that reference the term "royalties" or similar expressions, ensuring that the Australian interpretation of royalties applies to these agreements. The changes introduced by this Act apply to income derived on or after 1 July 1968, except for income already assessed before 5 July 1976, and the Act explicitly states that these amendments do not alter the interpretation of previous law in certain circumstances.

Key Provisions

The Income Tax Laws Amendment (Royalties) Act 1976 (Act) revises the definition of "royalty" under the Income Tax Assessment Act 1936 (Principal Act) to include a broader range of payments (s. 4). The new definition encompasses payments made for the use of intellectual property such as copyrights, patents, designs, or trademarks, as well as payments for the use of industrial, commercial, or scientific equipment, and the supply of scientific, technical, industrial, or commercial knowledge or information (s. 4(a)-(d)). It also includes payments for the use of motion picture films, films or video tapes for television, or tapes for radio broadcasting (s. 4(e)). Furthermore, the Act broadens the scope of royalty income subject to taxation for non-residents by aligning certain provisions with others in the Principal Act (s. 5). The Act imposes on taxpayers the obligation to report any income derived from royalties as defined by the amended Principal Act (s. 6). Taxpayers must ensure that any payments fitting the new definition of royalties are included in their assessable income unless they fall outside the ordinary meaning of "income" (s. 6(f)(ii)). Additionally, the Act mandates that the amendments apply to income derived from July 1, 1968, except for income assessed before July 5, 1976 (s. 8). The Act clarifies that its amendments should not be interpreted as retroactively affecting the interpretation of previous law regarding royalties, particularly in the context of international tax agreements (s. 9). The Act does not explicitly detail specific offences or penalties for non-compliance with its provisions. However, under the existing Income Tax Assessment Act 1936, failure to report income correctly can result in penalties. These penalties may include interest on unpaid tax, general interest charges, and in cases of intentional disregard, a penalty equal to 75% of the tax that should have been paid (s. 284-1 of the Principal Act). Additionally, the Commissioner of Taxation may refer cases of serious non-compliance to the Australian Taxation Office (ATO) for further investigation, which could lead to more severe penalties under other provisions of the Principal Act.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.