Private ruling: Exempt income
Date of advice: 27 February 2018
Published: May 2018
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020 | Year ended 30 June 2021
Date scheme commenced: 1 July 2014

Ruling: Q1: Is the income you earned from your contracts with the United Nations included in your assessable income? | A1: Yes

Relevant facts and circumstances: You are currently the holder of a consulting position within a Division of the Food and Agriculture Organisation of the United Nations (FAO). The offer of appointment as FAO Consultant states at point 6: This appointment does not carry any other additional benefits. As a Consultant you do not participate in the Relevant Joint Staff Pension Fund nor does FAO reimburse any taxes levied on your earnings. The terms of this appointment list your ● Country of assignment ● Division of the FAO ● Duration of appointment ● Number of working days ● Honorarium, living and other allowances ● Conduct During this time you will work with various international clients, as well as FAO regional/country offices and technical divisions. You carry out your duties under the overall supervision of the Chief of the Division. You are paid a gross fee (honorarium) into your Australian bank account on a frequent basis for services performed. You are also entitled to a series of allowances based on the type of work performed at assigned post. You are bound by the General description of tasks and objections to be achieved which lists your specific tasks and objections. You are bound by listed key performance indicators. Section 317 of the FAO Manual sets out the standards , conditions of service and procedures governing your positon as consultant. Section 343 of the FAO Manual sets out the FAO’s health, protection and medical insurance plan. Subsection 343.6.24 states: Consultants and PSAs employed on a WAE basis are covered under MCS only during the actual periods they are officially instructed in writing to perform FAO duties. You have provided copies of contracts related to prior appointments with the FAO including a letter from the Division to whom you report to directly. The FAO was established as a specialised UN Agency. Your terms of appointment refer to you as an international civil servant of the Food and Agricultural Organisation of the United Nations, you accordingly are a signatory to the employee Standards of Conduct set forth by the UN Secretary-General.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 6-5(2) | subsection 6-15(2) | section 6-20 | International Organizations (Privileges & Immunities) Act 1963 paragraph 6(1)(e) | Fifth Schedule, Part I | Specialized Agencies (Privileges and Immunities) Regulations 1986 | Regulation 9

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) advises 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. However, subsection 6-15(2) of the ITAA 1997 explains 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 Organizations (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. Paragraph 6(1)(e) of the IO(P&I)A provides that the Regulations may confer any or all of the privileges and immunities set out in Part I of the Fifth Schedule upon a person who is serving on a committee of, or participating in the work of, or performing a mission on behalf of, an international organisation. Regulations relating to the international organisation have been made under the IO(P&I)A. The FAO is listed under the Specialized Agencies (Privileges and Immunities) Regulations 1986. | Detailed Reasoning - Holder of an office: You consider that you are the holder of an office and thus are entitled to the privileges and immunities afforded to those personnel who are officials or office holders within an international organisation. The communication you have provided from the Chief of a Division of the FAO refers to your positon as ‘Consultant, within the Division in the Relevant Organisation of the United Nations (FAO)’. Your positions were offered to you by the FAO as offers of appointment as FAO Consultant. The FAO Jobs website points out the different opportunities to work for them: ● FAO employs a wealth of consultants every year, usually on a short-term basis, to provide expertise beyond that of regular staff. ● Please visit the list of consultancy opportunities currently available in the Organization. | Detailed Reasoning - CONSULTANTS: Consultants hold the status of “official” of the Organization and they represent the Organization externally. A Consultant is generally engaged to perform functions for which FAO has a temporary but not continuous need. They are recruited to perform functions of an advisory or consultative nature, for which they have the requisite academic background and/or relevant work experience. In all cases, Consultants must meet minimum relevant qualifications and language proficiency standards similar to those of professional positions: Advanced University Degree and working knowledge of one of the FAO languages (English, French, Spanish, Arabic, Chinese, Russian) and limited knowledge of a second FAO language. | Detailed Reasoning - Levels: There are three different categories of Consultants based on the number of years of professional experience requested: C-Base level The C-level Consultant is typically employed for assignments requiring from one to four years of relevant experience post graduation. The assignment requires basic professional inputs such as descriptive or analytical assignments, identifying problems etc., with their role ending at the analytical and descriptive level. The Consultant is expected to have good familiarity with the theory and concepts of the area of specialization and provide sound analytical input to the work of others. The C-level Consultant is typically closely supervised by more experienced staff members or senior Consultants. B-Middle level The B-level Consultant is typically employed for assignments which require a specialized expertise and minimum five years of professional experience. These assignments should require seasoned professionals, specialist advisors or experts with complete knowledge of the subject area and the ability to adapt concepts to emerging needs. The B-level Consultant is expected to carry out assignments with a high level of independence and perform the assigned work with minimal technical guidance. A-High level The A-level Consultant is typically employed for a task requiring top level expertise in a particular specialty and minimum twelve years of professional experience. The assignment may result in operational activities involving large commitments of human and/or financial resources. Assignments will typically include the delivery of complex analysis and reports or authoritative advice on highly complex or technical issues. The Consultant is expected to deliver assignments with technical independence. Assignments at this level are innovative or even groundbreaking, and, in addition, require facilitation and coordination. An A-level Consultant can have significant visibility outside the Organization and may be called upon to shape perceptions of stakeholders and motivate partners. We note that the word ‘official’ on the FAO website has been placed in quotation marks. The Oxford Dictionary explains quotation marks used in this way (also called ‘scare quotes’) are placed around a word or phrase to draw attention to an unusual or arguably inaccurate use of that word or phrase. Consequently we cannot use this reference as a basis for our decision. We refer to Taxation Ruling 92/14 Income tax: taxation privileges and immunities of prescribed International Organisations and their staff . The FAO is established as a specialised UN Agency. TR 92/14 describes the operation of privileges and immunities relating to taxation that apply to International Organisations and persons working for these organisations. The ruling states that to determine whether and to what extent exemptions may apply to a particular International Organisation or Specialised Agency, it is necessary to examine the regulations for that organisation or agency made under the IO(P+I)A: the exemption from liability to tax is restricted, or not available to all organisations and agencies. Regulation 9 of the Specialized Agencies (Privileges and Immunities) Regulations 1986 state: | Detailed Reasoning - 9 Privileges and immunities of persons performing missions for a Specialized Agency: (1) A person who is serving on a committee of a Specialized Agency to which this subregulation applies or is performing, whether alone or jointly with other persons, a mission on behalf of such a Specialized Agency has the privileges and immunities specified in paragraphs 1, 2, 3, 4, 5 and 6 of Part I of the Fifth Schedule to the Act. (2) Subregulation (1) applies to: (a) the Food and Agriculture Organization of the United Nations; … Part I of the Fifth Schedule to the Act states: Part I Privileges and Immunities of Person serving on Committee or participating in Work of, or performing Mission on behalf of, International Organisation 1. Immunity from personal arrest or detention. 2. Immunity from suit and from other legal process in respect of acts and things done in serving on the committee, participating in the work or performing the mission. 2A. Exemption from taxation on salaries and emoluments received from the organisation. 3. Inviolability of papers and documents. 4. The right, for the purpose of communicating with the organisation, to use codes and to send and receive correspondence and other papers and documents by couriers or in sealed bags. 5. Exemption from currency or exchange restrictions to such extent as is accorded to a representative of a foreign government on a temporary mission on behalf of that government. 6. The like privileges and immunities in respect of personal baggage as are accorded to a diplomatic agent. As you are performing a consultancy role on behalf of the FAO, the information you have provided in the form of your ‘terms of appointment’ does not indicate to us that you are serving on a committee of a Specialized Agency or performing a mission on behalf of the FAO. Part 2A is the paragraph that provides exemption from taxation on salaries and emoluments received from the organisation. Paragraph 2A does not apply to the FAO. The Commissioner is not satisfied that you are an official or the holder of an office because: ● Your employment contracts specifically state that you are employed as a consultant. ● The Terms of Appointment state that “As a consultant recruited under Manual Section 317, …”. Section 317 of the FAO Manual relates specifically to consultants. ● You have signed the Terms of Appointment and by doing so accepted the offer of appointment ‘as a consultant’. ● The duration of your contracts are fixed term. ● You are employed for a specific amount of working days on a when actually employed (WAE) basis. Subsection 343.6.24 of the FAO Manual states that Consultants employed on a WAE basis are covered under the Medical Insurance Scheme only during the actual periods they are officially instructed in writing to perform FAO duties. The consultancy roles you have successfully obtained were for fixed periods. You were no doubt selected because your particular skills and expertise were recognised by the FAO. You have carried out your roles in such a manner that the FAO have engaged you on more than one occasion and as you have stated, you will be continuing for many years as you undertake the numerous future projects planned for you by the FAO. However, you have been appointed as a consultant to the FAO and for this reason you are not entitled to the privileges and immunities provided in the International Organisations (Privileges and Immunities) Act 1963 .