ARTICLE 6

Income from Real Property

This Article provides that income from real property may be taxed by the Contracting State where the property is located. This rule does not confer an exclusive right of taxation on the State where the property is located. It simply provides that the situs State has the primary right to tax such income, regardless of whether the income is derived through a permanent establishment in that State or not. The provision in the U.S. Model for a binding election to be taxed on a net basis was deleted. Such an election is available under U.S. law and Australia taxes income from real estate on a net basis. The Article incorporates the rule that a leasehold interest in land and rights to exploit or explore for natural resources constitute real property situated where the land or resources, respectively, are situated. Except for those cases, the definition of real property is governed by the internal law of the Contracting State where the property is situated.