Was a few years ago, I'd have to google it myself.
google: US australia tax treaty; search: "royalty" within it (has a particular meaning in the act). The term "component" is not actually used, IIRC. When the IRS audited a US firm I know, they had to sort it out with their non-US component suppliers.
I'm not at all sure, but maybe "w8-ben" is the relevant form (though it serves several purposes). Whatever the form is, I noted that Atlassian had a pdf of it on their site, and avoided all the complexity because their products were used directly by users (i.e. aren't components).
Doesn't sound like it but unfortunately that's not enough information for me to tell. It might be. BTW a "contract" includes pretty much every transaction, even if immediately performed.
> (a) payments or credits of any kind to the extent to which they are consideration for the use of or the right to use any:
> (i) copyright, patent, design or model, plan, secret formula or process, trademark or other like property or right;
So, by 12.(a)(4)(i), if a customer pays you so they can redistribute your copyrighted code (i.e. a component), it's a "royalty".
BTW Reading it literally, this "right" includes the mere use of copyrighted material - but here it's meant as more serious aspects of copyright, like the right of (re)distribution.
IIRC, there's a wrinkle: in something like a compiler, which is used by the customer and not redistributed, but includes some part that is redistributed (like stdlib), this anxilliary distribution doesn't alter the character of the primary transaction. IIRC, the ATO stated this in what I think is called a "tax note" - a decision made internally (i.e. not held by a court).
tl;dr you can get away with a little redistribution
It's a barrier to entry, favouring big caps that can afford international tax law specialist accountants/lawyers.
I think that works: free means no royalty paid; and the convention above specifically excludes ordinary services (IIRC). It includes "scientific" etc advice in the next point (ii), and I never looked into exactly what that covers... services/support for an ordinary component doesn't sound like it's covered (and if it was, it wouldn't be because it was a component - the issue I raised).
As a separate business issue, there's other problems with getting people to pay services for something they already have - in that sense, it's not "a way around". Of course, some market segments do really want that support. And if that's already your business model, well no problem.
I can't think of any examples of an open source component with services/support. SleepcatDB and ghostscript are opensource components, but are dual-licensed (i.e. have a second proprietary license permitting redistribution as closed source). MySQL? Cygwin? Hibernate/JBoss? Red Hat?... not sure these are components that are often redistributed (though of course users could, license permitting).
google: US australia tax treaty; search: "royalty" within it (has a particular meaning in the act). The term "component" is not actually used, IIRC. When the IRS audited a US firm I know, they had to sort it out with their non-US component suppliers.
I'm not at all sure, but maybe "w8-ben" is the relevant form (though it serves several purposes). Whatever the form is, I noted that Atlassian had a pdf of it on their site, and avoided all the complexity because their products were used directly by users (i.e. aren't components).
HTH!