Private ruling: Assessable Income
Date of advice: 28 February 2018
Published: June 2018
Ruling period: Year ending 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Is the income you receive from the international organisation assessable income? | A1: No

Relevant facts and circumstances: You are an Australian citizen. You are an Australian resident for taxation purposes. You were appointed to a position by the international organisation. Your appointment is as an employee. You conditions of employment are set out in the staff handbook. You moved to Country B to take up this position for approximately twelve months.

Relevant legislative provisions: Income Tax Assessment Act 1997 Sub-section 6-5(2), Section 6-20(1)(3)

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Section 6-20(1)(3) of the ITAA 1997 states that an amount of ordinary income or statutory income is exempt income if it is made exempt from income tax by a provision of this Act outside this Division or another Commonwealth law. The International Organisation (Privileges and Immunities) Act 1963 (IOPIA) is a Commonwealth Act under which an international organisation, and persons engaged by it, may be accorded certain privileges and immunities including an exemption from tax. The Commissioner's views on the application of IOPIA are set out in Taxation Ruling TR 92/14 (including Addendum). Paragraph 6 of TR 92/14 states that persons engaged by an international organisation including expert or consultant may be accorded privileges and immunities in the nature of exemption from taxation as described in the Second, Third, Fourth and Fifth Schedules to the IOPIA. However, it is necessary to examine the regulations of the particular International Organisation to ascertain a person's entitlement for taxation exemption. Paragraph 12 of TR 92/14 provides that Australia's general policy is that salaries and emoluments received by experts and consultants engaged by international organisations are not exempt from tax in Australia. However, limited exemption is provided under regulations regarding Company A. Article 53 of the international organisation states that, its assets, property and income shall be exempt from all direct taxes (not being charges for public utility services). Paragraph 6 states that officeholders, officers and employees of the international organisation shall be exempt from national income tax. Paragraph 7 of Article 53 allows a State to preserve its right to tax the salaries and emoluments paid by the international organisational to nationals of that State by depositing a declaration to that effect along with its instrument of ratification. Australia deposited such a declaration along with its instrument of ratification, thereby preserving its right to tax Australian citizens or permanent residents employed by the international organisation. The exemption is denied if the person is an Australian resident and the services are rendered in Australia, unless the person is not an Australian citizen and came to Australia solely to perform his or her duties. | Detailed Reasoning - Conclusion: You moved to Country B for the purpose of this position, accordingly, the payments received by you from the international organisation is sourced in Country B not in Australia, therefore, it is non-assessable income under Section 6-20(1)(3) of the ITAA 1997.