Private ruling: Assessable income – consultancy
Date of advice: 28 March 2018
Published: June 2018
Ruling period: Year ending 30 June 2017
Date scheme commenced: July 2016

Ruling: Q1: Is the consulting income you receive from the Relevant Bank exempt from income tax under section 6-20 of the Income Tax Assessment Act 1997 for the portion of the contracted work performed in Australia? | A1: No | Q2: Is the consulting income you receive from the Relevant Development Bank exempt from income tax under section 6-20 of the Income Tax Assessment Act 1997 for the portion of the contracted work performed overseas? | A2: Yes

Relevant facts and circumstances: You are an Australian resident for taxation purposes. You have signed a contract with the overseas organisation to provide consulting services from XXXX until XXX in Country Y. You worked XX days from your home in Australia. You worked XX days in Country Y.

Relevant legislative provisions: Income Tax Assessment Act 1997 Sub-section 6-5(2)

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident taxpayer will include ordinary income derived from all sources, whether in or out of Australia, during the income year. Income from consultancy 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 provides 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 Relevant Development Bank is an organisation prescribed under the IO(P&I)A. The Commissioner’s guidelines as to the assessability of remuneration derived from International Organisations are dealt with in Taxation Ruling TR 92/14 Income tax: taxation privileges and immunities of prescribed International Organisations and their staff. Commencing at paragraph 11, TR 92/14 states: | Detailed Reasoning - Experts/consultants: 11. Persons serving on a Committee or participating in the work of, or performing a Mission on behalf of an International Organisation may be accorded exemption from tax on salaries and emoluments received from the organisation. 12. This usually covers experts and consultants engaged by the organisation. Generally, Australia's policy is that experts and consultants are not exempt from tax in Australia. However, limited exemption has been provided under regulations in the following cases - Relevant Development Bank, Common Fund for Commodities, Customs Cooperation Council and the International Court of Justice. 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 [sic] solely to perform his or her duties. From the above it can be seen that the exemption from taxation is not extended to Australian citizens who are engaged by the X and are carrying out their work while in Australia. You worked XX days from your home in Australia for the X. The payment you receive for work performed for the X in Australia is not exempt from tax under sub-regulation 7(2) of the X Regulations as you are a resident of Australia and receive payment for work rendered in Australia. Accordingly the payment is assessable under subsection 6-5(2) of the ITAA 1997. The payment you receive for work performed for the X in Country Y is exempt from tax under sub-regulation 7(1) of the X Regulations as the payment is an emolument received while performing services for the X overseas. Accordingly the payment is not assessable under subsection 6-5(2) of the ITAA 1997 as the payment is exempt under section 6-20 of the ITAA 1997. | Detailed Reasoning - Note:: You will need to apportion your payment according to the actual time you spend in Australia and the actual time you spend overseas.