Private ruling: Exempt foreign source income
Date of advice: 27 September 2017
Published: February 2018
Ruling period: Year ended 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021
Date scheme commenced: 1 July 2016

Ruling: Q1: Is the income derived by you from a specialised agency for services carried out partly in Australia and partly outside Australia, assessable income? | A1: No

Relevant facts and circumstances: You are an Australian resident for taxation purposes. You have taken up an appointment as a short term consultant with a specialised agency, an agency of an international organisation. You have been employed on one year contracts that have been renewed each year since 2011. You are sometimes required to travel overseas. The income you receive is paid directly into your Australian bank account. The specialised agency does not withhold tax from the payments it makes to you. You have a letter issued by the specialised agency confirming you hold an office and are an official of the specialised agency. That office is not a high office. You are named on the list of officials provided to the Australian Government pursuant to section 18 of the UN Convention on the Privileges and Immunities of the Specialized Agencies.

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 section 6-20, | International Organisation (Privileges and Immunities) Act 1963 subsection 5(1), | International Organisation (Privileges and Immunities) Act 1963 section 6, | International Organisation (Privileges and Immunities) Act 1963 paragraph 2 of part I of the fourth schedule and | Specialized Agencies (Privileges and Immunities) Regulations 1986 regulation 8.

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 will include ordinary income derived from all sources, whether in or out of Australia, during the income year. 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 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 & 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. Subsection 5(1) of the IO(P&I)A provides that the regulations may declare an organisation to be an organisation to which the IO(P&I)A applies. The specialised agency is listed in the Schedule to the Specialized Agencies (Privileges & Immunities) Regulations 1986 (SA(P&I) Regulations). The SA(P&I) Regulations are made under section 6 the IO(P&I)A. Regulation 8 of the SA(P&I) Regulations sets out the privileges and immunities of officers, other than high officers of specialized agencies. A person who holds an office in a Specialized Agency has the privileges and immunities specified in Part I of the Fourth Schedule to the IO(P&I)A. You hold an office in the specialised agency. Paragraph 2 of Part I of the Fourth Schedule to the IO(P&I)A provides an exemption from taxation on salary and emoluments received from the international organisation. There is nothing in the IO(P&I)A or the regulations which restricts the privileges and immunities afforded to the taxpayer to those circumstances when the taxpayer is performing their duties outside Australia. Accordingly, as the income you received from the specialised agency is exempt income under section 6-20 of the ITAA 1997, it is not assessable under subsection 6-5(2) of the ITAA 1997.