Private ruling: Foreign income
Date of advice: 4 February 2020
Published: March 2020
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Does subparagraph 6(1)(d)(i) of the International Organisations (Privileges and Immunities) Act 1963 (Cth) and section 6-20 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to exempt from income tax the remuneration you derive from Organisation A on the basis that you are an office holder? | A1: No

Relevant facts and circumstances: You are an Australian resident for tax purposes who has accepted several consultancy contracts to work as an Officer in various capacities with Organisation A stationed outside Australia during the income years ending 20XX, 20XX and 20XX. Initially, your supervisor was based in Country A but your position was a very mobile role which requires you to liaise with national and local logistics staff in various other overseas countries. In 20XX your role changed to a support role based in Australia providing support and training. However this still required you to travel and offer training in various overseas countries for a few days per month. From 20XX to late-20XX almost all of your work was undertaken outside Australia. You were then based in Australian from 20XX until 20XX. During this time most of your work was performed in Australia with the balance being performed in various overseas countries. Although your preference and intention was that of continuing employment, your employer only offered short-term employment contracts due to the uncertainty of continuing funding. Organisation A does not allow employment over 11 months continuous service and a break in service was mandatory after 11 months. You receive a salary but paid all operational expenses. You were however reimbursed for internet and telephone costs. While you paid for accommodation this was reimbursed under a daily stipend which was paid depending on location. The location of your work was determined by the Organisation A depending on immediate needs. While employed as a contractor you were unable to work for other organisations, unless you worked part-time, in which case other employment was possible. Your position did not exist until an Organisation A office was established in Country A in 20XX. However the role is intended to be an ongoing one, depending on continuing funding. The purpose of your role was to compile a range of information for use by Organisation A and other responders to use in disasters that may occur in various overseas countries. You are not tasked with preparation of a specific report or work product and have no direct staff which you are required to supervise. Description of duties and each specific contract You have supplied several letters of offer, Terms of employment as stated in the contract (as a consultant which you have signed and accepted) along with the description of duties as they relate to each contract with Organisation A, noting that each contract you have signed clearly indicates that you are being engaged as a consultant. Your duties in each role included: · reviewing various reports and identifying gaps and areas for improvement. · producing reports on specific situations for internal and external use in various overseas countries including Country A. · providing support to ongoing projects. · review and support the finalisation of standard operating procedures. · Providing coaching, support and guidance to other team members to deliver on the expected results Terms of employment in each contract · The contract duration were all short term (under three months) from the assignment start date. · Daily pay rate to be paid to the consultant at the end of the months upon certification from your supervisor of satisfactory service and actual number of days worked. The final payment will be released upon receipt of separation clearances · The employment may be terminated by the consultant or by the Programme upon two weeks written notice (for appointments of two months or more) and upon five days written notice (for appointments of less than two months). · Consultants do not accrue any leave and cannot participate in the Staff Pension Fund. The consulting positions that you occupied do not have defined duties, functions, responsibilities or powers within Organisation A, as the positions purely in an advisory, guidance, coaching, training and supporting capacity, which is evidenced in reference to the supplied duty statements for each position. You anticipate that these roles would continue should you resign or depart from these positions. However this depends on cost allocations and the budget for each programmatic year. Hence it is not certain that these roles would necessarily continue in future should you leave, as this depends on budget allocations.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-15(2) | Income Tax Assessment Act 1997 Subsection 6-5(2) | Income Tax Assessment Act 1997 Section 6-20 | The International Organisations (Privileges and Immunities) Act 1963 Subsection 3(1) | The International Organisations (Privileges and Immunities) Act 1963 Subsection 5(1) | The International Organisations (Privileges and Immunities) Act 1963 subparagraph 6(1)(d)(i) | United Nations (Privileges and Immunities) Regulations 1986 sub regulation 10(1) | United Nations (Privileges and Immunities) Regulations 1986 regulation 11

Reasons for decision: Summary: Income from professional services is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. However, subsection 6-15(2) of the ITAA 1997 says that if an amount is exempt income then it is not assessable income. Section 6-20 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 Organisations (Privileges and Immunities) Act 1963 (IO(P&I)A) 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. The IO(P&I)A exempts from taxation certain income of a person connected with an international organisation, to the extent that it satisfies all of these elements: · the income is received from an international organisation to which the IOPIA 1963 applies · the person is connected with the international organisation in one of the ways set out subsection 6(1) of the IO(P&I)A and · the conditions and other particulars provided in the regulations for the international organisation are satisfied in relation to the income of the person. Subsection 3(1) of the IO(P&I)A defines the term 'international organisation to which this Act applies' to mean an organisation that is declared by the regulations to be an international organisation to which the IO(P&I)A applies, and includes a body established by such an organisation. Subsection 6(1) and Part I of the Second to the Fifth Schedules to the IOPIA 1963 inclusive set out the taxation exemptions that can be conferred upon certain persons currently connected with an international organisation. Relevant to your case, this includes the following: · a person who holds an office in an international organisation (but who is not a holder of a high office) - as per paragraph 6(1)(d) and Part I of the Fourth Schedule to the IOPIA 1963 Relevantly, as per item 2 of Part 1 of the Fourth Schedule this includes an exemption from taxation on salaries and emoluments received from the international organisation. Organisation A is an Agency to which the IO(P&I)A applies as specified in the specific regulations (the regulations) for that organisation. A specific sub-regulation of the regulations provides that as a person who held an office in Organisation A, other than a person that is a high office holder, has the privileges and immunities specified in Part 1 of the Fourth Schedule to the IO(P&I)A, which includes exemption from taxation on salaries and emoluments received from the organisation. Therefore the payments that you received in relation to your engagement with Organisation A will be exempt from income tax if it can be shown that you are a holder of an office (but not a high office) of Organisation A at the time you were undertaking those assignments. This is a question of fact that needs to be resolved separately for each assignment. Office holder As per South Sydney District Rugby League Football Club Ltd v. News Ltd [2000] FCA 1541 (the South Sydney District Rugby League Football Club Ltd Case) in determining what the nature of a relationship was between two parties it is necessary to look at the form and substance of that relationship. It is not appropriate to adopt the label that one or more parties may have given to the relationship and let that determine what it is. 'Office' and 'office holder' are not defined by the IOPIA 1963 and the ITAA 1997 and therefore they should take their ordinary meaning. Care must be taken to ensure that it is read with regard to the context of the statutory provision (as per Certain Lloyd's [2009] HCA 56 (Lloyds Case) at [23-26]). The guidance provided in the rulings on what is an office holder The Commissioner's views on what is an office holder are set out in in draft Taxation Ruling TR 2019/D1. As per paragraph 27 of TR 2019/D1 a holder of an office can include a person who works as an employee of an international organisation, but it does not include a person (whether an employee or not) who is: · locally engaged and paid an hourly rate, or · engaged as an expert or consultant. An appointment, office or position must exhibit the characteristics of an office holder. As per paragraph 25 of TR 2019/D1 the characteristics of an office holder for an appointment, office or position are: · independent existence - the office must exist regardless of the individual who occupies the office from time to time. This means that if the individual currently occupying the office vacates that office, the office must continue to exist to be filled by another individual · duties, functions, responsibilities or powers - the office must have identifiable duties, functions, responsibilities or powers other than a mere advisory function. These features of the office (or of the panel, board, committee or tribunal to which the individual has been appointed) would usually be specified in the relevant legislation or statutory instrument [or for a common law situation, foundation document or equivalent document of that nature] and · the relevant duties, functions, responsibilities or powers must attach to the office itself, rather than the individual who occupies the office. Further guidance on who is an office holder is also provided by Taxation Ruling TR 2002/21 . As is apparent from the Commissioner's views and the relevant case law in determining who is an office holder it is not sufficient to simply be an employee and thereby be regarded as an office holder. An office holder is someone who has identifiable duties, functions, responsibilities or powers to carry out. It does not include an employee who is merely following the command of a higher ranking person. This does not take away from the fact that an office holder may be an employee - it illustrates however that a person who is an employee is not necessarily or automatically to be taken to be an office holder. Case law on the meaning of office holder As discussed in paragraphs [31] and [34] of FCT v. Jayasinghe [2017] HCA 256 (the Jayasinghe Case) the term 'office' cannot be defined by reference to permanence or succession. Whether a person holds or performs the duties of an office in an international organisation concerns the relationship between the person and that organisation. As per paragraph [37] of the Jayasinghe Case, the substance of the terms of the engagement of the person and the relationship between that engagement and the organisation's performing its functions must be considered. Whether someone is an office holder is a question of fact, considered on a case by case basis. It should be clear from the duties and authority associated with the person's position within the international organisation why the privileges and immunities are conferred. As per paragraph [38] of the Jayasinghe Case a person is unlikely to be an 'office holder' if their terms of engagement place them outside the organisational structure and do not include defined duties or authority in relation to the organisation and its functions. This is consistent with the purpose of the IOPIA to confer privileges and immunities to assist organisations to perform their functions, rather than to personally benefit persons connected with the organisation (see paragraph 39 of the Jayasinghe Case and paragraph [54] of Macoun v. FCT (2015) 257 CLR 519). The High Court also affirmed the Commissioner's view outlined in paragraph 27 of TR 2019/D1 in paragraph [52] of the Jayasinghe Case. Your circumstances As noted in the paragraphs above, the word office connotes a position of defined authority in an organisation, such as a director of a company or the president of a club. The holder of a professional employment is not an office holder merely because the position has a name. An office holder's position is more than something which is important or substantial within a company. Following the listed reasons below, your roles on your assignments with Organisation A are best described as that of an expert or consultant, and not an office holder. As such the substance of your relationship is consistent with that of a contractor and what one would commonly understand a 'contractual employee' to be. You have also provided several letters of offer which all indicate that you are a fixed short term contractor in the capacity of a consultant. The letters of offer do not indicate that you hold an office in Organisation A. You are not an office holder in respect of the assignments you undertook for Organisation A. This is because: · Independent existence or permanence - the position you occupied as a consultant for your assignments with Organisation A did not have any permanence to them. You have stated that the continuing existence of your position is not guaranteed, as it depends on budget considerations. This demonstrates that your position does not necessarily continue to exist should you depart. Furthermore, the view could be taken that each of your positions is a separate engagement totally independent of the previous one. This is on the basis that each engagement had a different focus from the previous one, required separate tasks or training to be performed and, it would appear, there was no need for any knowledge or other things from a previous engagement to be applied in completing a current or future engagement. This is opposed to an 'office' where the position itself is an ongoing or continuing one, either continuously or for a substantial term even if the person that occupies it at a particular point changes (an example would be the position of Governor General or the position of a Royal Commissioner). · duties, functions, responsibilities or powers are defined by the office - the consulting positions that you occupied do not have duties, functions, responsibilities or powers as it is purely in an advisory, guidance, coaching, training and supporting capacity. In reference to the supplied duty statements for each position you did not have any defined duties or authority in relation to Organisation A and it carrying out its functions. As such it cannot be said that your position as a consultant is defined by the duties, functions, responsibilities or powers that you carried out while occupying it. Therefore, as per this factor you would not be regarded as an office holder.Similarly, your duties, functions and responsibilities have not been identified as belonging to your position. Rather they appear delegated to you in your present role. In addition, you have not been tasked with preparation of a specific report or work product for Organisation A, you have no direct staff which you are required to supervise or are responsible for. · duties, functions, responsibilities or powers belong to the office - the position of consultant that you occupied does not have duties, functions, responsibilities or powers as it is purely an advisory, guidance, coaching, training and supporting capacity. There is also nothing to suggest that there is a requirement to have any knowledge or take anything from prior engagements to future engagements of this type. Therefore there is no transfer of duties, functions, responsibilities or powers from one occupant of the position to the next one. As none of these things transition from occupant to occupant with the position you would not be regarded as an office holder as per this factor. Instead, for the assignments that you undertook you would be better regarded as an expert or a consultant. This is on the basis that the assignments: · are short-term - all of your assignments range from NN to NN days in duration which is consistent with an expert or consultant role. This is opposed to an officer holder who would be expected to hold their position for a longer period of time to give stability to the office and allow its duties, functions and responsibilities to be performed in an effective manner. · is performed in an advisory capacity - the undertaking of work in an advisory, guidance, coaching, support and training capacity which is consistent with an expert or consultant role. Furthermore the work that was undertaken did not include any work concerned with any recommendations or permit for the making of significant decisions. This is opposed to an office holder who has duties, functions and responsibilities within an organisation that go beyond that of merely being an advisor. · requires deep-level technical skills and knowledge of the subject matter or, for a large subject matter area such as logistics, a part of the matter - this is consistent with the person being an expert or consultant. This is opposed to an office holder who would be expected to have a more general understanding and broader expanse of knowledge. An office holder would not necessarily be expected to have detailed knowledge as they would have advisers and staff to provide this. In addition an office holder would be expected to have sufficient administrative and contextual knowledge to be able to run their office effectively - which is something that is not required of an expert or consultant. As such the payments that you have received are not be considered to be exempt income on the basis that you are an office holder of an international organisation under paragraph 6(1)(d) of the IOPIA 1963, taking into account the regulations, and section 6-20 of the ITAA 1997. Conclusion As stated above, under the specific sub regulation of the regulations a person who holds an office, other than a high office, in a Specialized Agency, has the privileges and immunities specified in Part I of the Fourth Schedule to the IO(P&I)A, including income tax exemption on salaries and emoluments received from the organisation. However in your case Part 1 of the Fourth Schedule to the IO(P&I)A which grants the income tax exemption does not apply as you do not hold an office as specified in the Schedule. Instead you are regarded as an expert or consultant who is performing a mission to Organisation A but, as per the specific sub regulation of the regulations, no income tax exemption is available for a person working in this capacity. Accordingly, the income derived by you as a consultant for Organisation A is assessable under subsection 6-5(2) of the ITAA 1997. Similarly, the non-salary benefit allowances you derive as part of your employment are also not exempt and are hence assessable.