Private ruling: Foreign source income
Date of advice: 23 October 2018
Published: January 2019
Ruling period: 1 July 2017 to 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Is the income you received from Food and Agricultural Organisation of the United Nation (FAO) exempt? | A1: No | Q2: Is the income you received from a relevant Bank exempt? | A2: Yes

Relevant facts and circumstances: You are an Australian resident. You provided consultancy services to FAO under a contract. Your duty station was in Country A. FAO provided you with a letter confirming your assignment dates. You received a specified payment. You provided consultancy services to the relevant Bank The relevant Bank provided you with a letter, confirming that you will be the resource person for a specific project and specified duration. The relevant Bank provided a lump sum payment upon completion of the assignment. You worked in Country B.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5(2) | Income Tax Assessment Act 1997 subsection 6-15(2) | Income Tax Assessment Act 1997 section 6-20 | International Organisations (Privileges and Immunities) Act 1963 Subsection 6(1) | International Organisations (Privileges and Immunities) Act 1963 Fourth and Fifth schedule | Specialized Agencies (Privileges and Immunities) Regulations 1986

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) advises that the assessable income of an Australian resident will include ordinary income derived from all sources, whether in or out of Australia, during the income year. However, subsection 6-15(2) of the ITAA 1997 explains that if an amount is exempt income then it is not assessable income. Subsection 6-20(1) of the ITAA 1997 provides that an amount of ordinary income is exempt income if it is made exempt from income tax by a provision of the ITAA 1997 or another Commonwealth law. The International Organizations (Privileges & Immunities) Act 1963 (IO(P&I) Act) is a Commonwealth law under which an international organisation, and persons engaged by it, may be accorded certain privileges and immunities including an exemption from tax. Paragraph 6(1)(e) of the IO(P&I) Act provides that the Regulations may confer any or all of the privileges and immunities set out in Part I of the Fifth Schedule upon a person who is serving on a committee of, or participating in the work of, or performing a mission on behalf of, an international organisation. | Detailed Reasoning - FAO income: Regulations relating to the international organisation have been made under the IO(P&I) Act. The FAO is listed under the Specialized Agencies (Privileges and Immunities) Regulations 1986. Holder of an office If a tax payer held an office in an international organisation within the meaning of subparagraph 6(1)(d)(i) of the IO(P&I) Act, the taxpayer is entitled to an exemption from taxation on salaries and emoluments received from the international organisation under clause 2 of part 1 of schedule 4 to the IO(P&I) Act. Taxation Ruling TR92/153 Income tax: who is a 'person who holds an office' as specified in various regulations made under the International Organisations (Privileges and Immunities) Act 1963, finds that persons engaged as consultants do not hold an office in relation to the prescribed international organisation. Regulation 9 of the Specialized Agencies (Privileges and Immunities) Regulations 1986 states: (1) A person who is serving on a committee of a Specialized Agency to which this subregulation applies or is performing, whether alone or jointly with other persons, a mission on behalf of such a Specialized Agency has the privileges and immunities specified in paragraphs 1, 2, 3, 4, 5 and 6 of Part I of the Fifth Schedule to the Act. (2) Subregulation (1) applies to: (a) the Food and Agriculture Organization of the United Nations; Part I of the Fifth Schedule to the Act states: Privileges and Immunities of Person serving on Committee or participating in Work of, or performing Mission on behalf of, International Organisation 1. Immunity from personal arrest or detention. 2. Immunity from suit and from other legal process in respect of acts and things done in serving on the committee, participating in the work or performing the mission. 2A. Exemption from taxation on salaries and emoluments received from the organisation. 3. Inviolability of papers and documents. 4. The right, for the purpose of communicating with the organisation, to use codes and to send and receive correspondence and other papers and documents by couriers or in sealed bags. 5. Exemption from currency or exchange restrictions to such extent as is accorded to a representative of a foreign government on a temporary mission on behalf of that government. 6. The like privileges and immunities in respect of personal baggage as are accorded to a diplomatic agent. You are performing a consultancy role on behalf of the FAO. The information you have provided does not indicate to us that you are serving on a committee of a Specialized Agency or performing a mission on behalf of the FAO. Part 2A is the paragraph that provides exemption from taxation on salaries and emoluments received from the organisation. Paragraph 2A does not apply to the FAO. You have been appointed as a consultant to the FAO and for this reason you are not entitled to the privileges and immunities provided in the IO (P&I) Act 1963. Your income from the FAO is not exempt from income tax. | Detailed Reasoning - Relevant bank income: Taxation Ruling TR 92/14 Income Tax: taxation privileges and immunities of prescribed International Organisations and their staff (TR 92/14) discusses taxation privileges and immunities of prescribed international organisations and their staff. TR 92/14 discusses that generally experts and consultants are not exempt from tax in Australia. However, some exemption has been provided under regulations for the relevant Bank. It further states that the exemption will be denied if the person is an Australian resident and the services are rendered in Australia. You are an Australian resident but you provided your consultancy services in Country B. Thus, your income from the relevant Bank is exempted from income tax.