The Commissioner of Taxation (“the Commissioner“) sought to require Channel 7 (“7“) to pay withholding tax on payments totalling almost $98M made by 7 to the International Olympic Committee (“the IOC“) for the exclusive right to the live broadcast of Olympic events for the 2002, 2004, 2006 and 2008 Games.
It was contended that the payments were in the nature of royalties for the use of copyright or other like property or right.
Whilst 7 accepted that the disputed payments arguably came within the definition of royalty in section 6 (db) of the Income Tax Assessment Act 1936 (“ITAA“) there was no such definition in the International Tax Agreements Act 1953 (Cwth) which extended to the Swiss Treaty governing double taxation.
“Royalty” is a defined term in s 6 of the ITAA as:
(db) the use in connection with television broadcasting or radio broadcasting, or the right to use in connection with television broadcasting or radio broadcasting, visual images or sounds, or both, transmitted by:
- satellite; or
- cable, optic fibre or similar technology.
In contrast, Article 12 of the Swiss Treaty provided:
The joint judgment of Kenny, Perram and Davies JJ, handed down late last month set out the scientific nature of the live broadcast received by 7:
By agreement between the IOC and 7, 7 was granted exclusive television and radio rights during a defined period. 7 owned the copyright in Australia of:
At the end of the period 7 assigned the copyright to the IOC.
In upholding the primary Judge Bennett J the Full Court found:
- The disputed payments did not relate to the use of copyright in a cinematograph film as copyright did not exist until the first copy of the film was made and 7 made the first copy not the IOC. The ITVR Signal received by 7 was not taken from any previously recorded version;
- The disputed payments were not for the use of “some other like property or right“. The phrase was found to extend the operation of a royalty to enable each country to enlarge or contract its intellectual property rights “so long as they fall within the genus of intellectual property“. Until amendment (in 2013) the Swiss Treaty did not contain an equivalent of section 6 (db) of the ITAA and the general law had not recognised the matters in the definition of royalty as forming a separate intellectual property right;
- The Commissioner had abandoned an argument that 7 had received a monopoly in respect of broadcasting of Olympic Games images and sounds over which it would acquire future copyright. In any event, 7 by its actions had created the copyright itself from the ITVR Signal which meant that the disputed payments could not constitute royalties as there was no payment for doing an act comprised in a copyright owned by another;
- Finally, the IOC had not forborne using any relevant property or right in Australia. This was because neither the IOC nor the host broadcaster had had the right to broadcast in Australia even though the host broadcaster had its own recording of the ITVR Signal.
The case again emphasises the need in copyright matters to examine precisely the nature of the right seeking to be protected, the defined category it falls within under the Copyright Act and when, where and in what circumstances it came into existence.
Neil Sadler | Special Counsel | +61 7 3338 7516 | email@example.com