Private ruling: International – foreign income
Date of advice: 18 April 2019
Published: June 2019
Ruling period: Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021
Date scheme commenced: 1 July 2018

Ruling: Q2: If your overseas organisation income is exempt, is it taken into account in calculating the income tax payable on other assessable income that you derive? Answer No

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You accepted an offer of employment with the overseas organisation on in the 2019 income year as a XXXX. The contract was entered into with the overseas organisation International office in an overseas country. You have provided us with a copy of this contract which sets out the terms and conditions of your posting. Your first posting will be overseas and will be for a period of 2 years. You will not perform any of your duties under the contract in Australia. You have not engaged any other person to perform part of the work of the position and you cannot engage other people to perform parts of the work. The position you have with the organization is an ongoing role and existed before and after you occupied it in the same capacity and manner you occupied it. You are on an open-ended employment contract with the organization until age 6X which is the retirement age in Country C. The position you hold is not a short term position. You have leave entitlements and other similar benefits associated with your employment. Your hours of work are determined by the organisation. You are not able to work for any other organisation while working for the overseas organisation. Your remuneration is on a monthly basis. You are not required to rectify any defects or issues that arise in your work. You pay for internet, health and travel insurance. You are not reimbursed or otherwise compensated for these expenses. You do not pay accommodation, telephone or travel expenses. You do not pay for any other expenses associated. You do not provide any of the tools required to carry out your duties. The organization provides you with a computer and a phone.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2) | Income Tax Assessment Act 1997 Subsection 6-15(2) | Income Tax Assessment Act 1997 Subsection 6-20(1) | International Organisations (Privileges and Immunities) Act 1963 | International Organisation Regulations | Tax Administration Act 1953 (TAA) Section 357-75

Reasons for decision: Summary: Question 1 An Australian resident’s assessable income includes all ordinary and statutory income from all sources, whether in or outside of Australia (sections 6-5 and 6-10 of the ITAA 97). An amount is exempt income under section 6- 20 of the ITAA 1997 if it is made exempt from income tax by a provision of either the ITAA 1997 or another Commonwealth law. This includes income received by a person who is connected with an international organisation that is exempted by the IOPIA 1963. Section XX of the IO(P&I)A states that regulations may confer upon the organisation and persons of a kind referred to in the specified organisations arrangement such privileges and immunities as are required to give effect to the Arrangement between the Government of Australia and the organisation on a regional headquarter in Australia (the Arrangement) (as per in Schedule X of the organisations Regulations). As per Division 2 of the Regulations this includes XXXX and as per Division X representatives of the organisations on temporary missions. Section X of the organisation regulation confers the specified privileges and immunities on XXXX of the organisation. For this purpose such a person is (a) a XXX of the organisation, in relation to acts and things done in the XXX capacity as a XXXX, including after he or she has ceased to be a XXXX; and (b) a family member of the XXXX. Section X of the organisations Regulations sets out the privileges and immunities that apply to XXXX of the organisation. As part of this subsection X (5) of the organisations Regulations provides that the XXX has immunity from taxation on the salaries and emoluments received from the organisation. However subsection X (6) of the organisations Regulations restricts the exemption by providing that it is not available to a XXXX who is an Australian citizen or permanent resident where that person is employed in Australia. This outcome provided for by the Regulations is consistent with the Arrangement and is therefore within the bounds of the organisations Regulations Based on the facts you have provided to us you are a XXXX of the organisation. You are exempt from taxation on your overseas organisations salary, wages or emoluments in Australia as you work for the overseas organisation outside Australia in your capacity as a XXX. Question 2 The exemption with progression rules applies to income exempted by sections 23AG and 23AF of the ITAA 1936. The exemption with progression rule does not apply where the foreign earnings are exempt under another provision, such as section 9D of the IOPI Act. This means that if a taxpayer’s foreign earnings satisfy the foreign earnings exemption but are also exempt under other specific provisions, such as those for pay and allowances of Defence Force members, for pay from international organisations, then tax on a taxpayer’s non-exempt income is not calculated on an exemption with progression basis. As your income is exempt under section XX of the IOPIA 1963 you will not need to take into account your foreign earnings from the overseas organisation in determining the taxation of your other income when calculating tax on other income.

Is your salary from your work with the overseas organisation exempt from tax in Australia under section 6-20 of the Income Tax Assessment Act 1997 (ITAA 1997)?