Private ruling: Foreign source income
Date of advice: 26 May 2017
Published: September 2017
Ruling period: Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 5 June 2017

Ruling: Q1: Is the income you earn as an employee of the overseas organisation exempt from tax in Australia? | A1: Yes.

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You will commence a 12 month contract with the overseas organisation in the 2017 income year. You will be an employee of the overseas organisation.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. However, subsection 6-15(2) of the ITAA 1997 states that if an amount is exempt income then it is not assessable. Subsection 6-20(1) of the ITAA 1997 provides that an amount of ordinary income is exempt income if it is made exempt by a provision of the ITAA 1997 or another Commonwealth law. | Detailed Reasoning - Foreign Source Income - United Nations: 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. Taxation Ruling TR 92/14 Income tax: taxation privileges and immunities of prescribed International Organisations and their staff (TR 92/14) discusses the operation of privileges and immunities relating to taxation that apply to International Organisations and persons working for these organisations. The overseas organisation (Privileges and Immunities) Regulations 1984 P&I) Regs) were made under the IO(P&I)A. Subsection 5(1) of the IO(P&I)A provides that the regulations may declare an organisation to be an organisation to which this Act applies. Paragraph 3(1)(b) of the IO(P&I)A defines the term an 'international organisation to which this Act applies' to mean an organisation that is declared by the regulations to be an international organisation to which this Act applies, and includes a body established by such an organisation. The overseas organisation is an international organisation to which the IO(P&I)A applies. Subparagraph 6(1)(d)(i) of the IO(P&I)A provides that the regulations may confer all or any of the privileges and immunities set out in Part 1 of the Fourth Schedule upon a person who holds an office in an international organisation to which this Act applies, not being an office prescribed by the relevant regulations as a high officer. Taxation Determination TD 92/153 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 (TD 92/153) provides that the phrase 'person who holds an office' in an international organisation covers those people who work as employees for the organisation but does not include persons who are locally engaged by the organisation and paid at an hourly rate or engaged by the organisation as experts or consultants. You will commence work as an employee of the overseas organisation in the 2017 income year, your income derived as an employee of the overseas organisation is exempt from tax in Australia under section 6-5 of the ITAA 1997.