Private ruling: Income – exempt – individual contractor – United Nations
Date of advice: 16 February 2018
Published: June 2018
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2016

Ruling: Q1: Does subparagraph 6(1)(d)(i) of the International Organisations (Privileges and Immunities) Act 1963 (Cth) apply to exempt from income tax the remuneration you derived from the United Nations Development Program? | A1: No

Relevant facts and circumstances: You are retained under a contract as an individual contractor by the United Nations Development Program (UNDP), to which the general conditions for contract of the United Nations (UN) apply. The UN Official to whom you report has signed a statement describing the role and function that you fill and how that fits within the structure of the Program. The Terms of Reference for your positon state: ● the context of your role ● the responsibilities of your role ● key deliverables ● information on working arrangements Clause X of the General Conditions of Contract you states that you are neither an employee nor an official of the UN and there is no master/servant relationship between you and the UN. Clause Y of the General Conditions of Contract states: The Individual contractor shall indemnify, defend, and hold and save harmless UNDP, and its officials, agents and employees, from and against all suits, proceedings, claims, demands, losses and liability of any kind or nature, including, but not limited to, all litigation costs and expenses, attorney’s fees, settlement payments and damages, based on, arising from, or relating to: (a) allegations or claims that the use by UNDP of any patented device, any copyrighted material or any other goods or services provided to UNDP for its use under the terms of the Contract, in whole or in part, separately or in combination, constitutes an infringement of any patent, copyright, trademark or other intellectual property right of any third party; or (b) any acts or omissions of the Individual contractor, or of any subcontractor or anyone directly or indirectly employed by them in the performance of the Contract, which give rise to legal liability to anyone not a party to the Contract, including, without limitation, claims and liability in the nature of a claim for workers’ compensation. Although the role could be undertaken from anywhere in the world you have chosen to undertake the role from your residence in Australia. The UN careers website outlines the types of employment opportunities available and explains the difference between each category and the specific requirements for each position. Your name is listed as the contact for Media enquiries.

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 (IO(P&I)A) | United Nations (Privileges and Immunities) Regulations 1986 (UN(P&I)Regs)

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 includes 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 provides 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. 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. You are retained under a contract by the United Nations Development Program (UNDP) on a project, to which the General Conditions of Contract for the services of Individual Contractors of the UNDP apply. The Manager of the project has made a statement that supports your contention you are more than an independent contractor. You are described on the project’s website as the lead person assisting and leading local country teams and reporting directly to the Team Leader. You contend that: ● Your role is ‘effectively woven into the fabric of the UNDP strategy of financing ecologically diverse projects across 30 member countries’. ● The role is seen by your team leader as being critical to the functioning of the project. He states that you are being retained for your skills seen as essential in ensuring success of a global strategy of the UNDP. ● Although you are required to report to a Manager, the practical application of your skills is that others within the UNDP across several locations and territories look to you for leadership. ● Not merely an ‘expert on mission’ or ‘limited to a specific task’, your role includes attendance at missions, but your role is seen as core strategic and thus you need to attend missions to provide coordination and thought leadership. Your terms of contract clearly are directed at much more than a specific task. You consider that you are the holder of an office and thus be entitled to the privileges and immunities afforded to those personnel who are officials or office holders within an international organisation. You have discussed X in detail and concluded that your role is significantly different to that which individual X carried out. Your position was advertised by the UNDP. The UNDP Jobs website points out the different opportunities to work for them: ● Staff; ● Consultants/Individual Contractors; ● Service Contractors; ● Internships; ● Junior Professional Officer Programme; and ● United Nations Volunteers (UNV). Under the Consultants/Individual Contractors link, the following information appears: UNDP frequently engages experts under individual contracts to work on short-term projects either as a consultant or an individual contractor. A consultant is a recognized authority or specialist in a specific field, engaged by the Organization in an advisory or consultative capacity. The functions of a consultant are results-oriented and normally involve analysing problems, directing seminars or training courses, preparing documents for conferences and meetings, or writing reports on matters within their area of expertise. An individual contractor is engaged by the Organization to provide expertise, skills or knowledge for the performance of a specific task or piece of work, which would be short-term in nature. The assignment may involve full-time or part-time functions similar to those of staff members. The role you successfully obtained was for a specified period. The UNDP project team were looking for a particular specialist. You were no doubt selected because your particular skills and expertise were recognised by the UNDP. You have carried out your role in such a manner that the UNDP are negotiating with you to extend your term with them. The General Conditions of Contract provided by you outline specifically your obligations under the contract. In particular we note the following clauses: X SUBCONTRACTORS: In the event that the Individual contractor requires the services of subcontractors to perform any obligations under the Contract, the Individual contractor shall obtain the prior written approval of UNDP for any such subcontractors. X PROHIBITION ON ASSIGNMENT; MODIFICATIONS: The Individual contractor may not assign, delegate, transfer, pledge or make any other disposition of the Contract, of any part thereof, or of any of the rights, claims or obligations under the Contract except with the prior written authorization of UNDP, and any attempt to do so shall be null and void. … X USE OF NAME, EMBLEM OR OFFICIAL SEAL OF THE UNITED NATIONS : The Individual contractor shall not advertise or otherwise make public for purposes of commercial advantage or goodwill that it has a contractual relationship with UNDP, nor shall the Individual contractor, in any manner whatsoever, use the name, emblem or official seal of UNDP, or any abbreviation of the name of UNDP, in connection with his or her business or otherwise without the written permission of UNDP. X INDEMNIFICATION: The individual contractor shall indemnify, defend and hold and save harmless UNDP, and its officials, agents and employees, from and against all suits, proceedings, claims, demands, losses and liability of any kind or nature, including, but not limited to, all litigation costs and expenses, attorney’s fees, settlement payments and damages, based on, arising from, or relating to: … (b) any acts or omissions of the Individual contractor, or of any subcontractor of anyone directly or indirectly employed by them in the performance of the Contract, which give rise to legal liability to anyone not a party to the Contract, including, without limitation, claims and liability in the nature of a claim for workers’ compensation. These clauses further demonstrate your status as an individual contractor. Your role was advertised as an individual contractor. You have defined responsibilities and key deliverables which are clearly identified in your contract. If this role is ‘woven into the fabric’ of the UN as you have stated, it would be a position advertised and managed by the General Secretary of the UN, and not by the UNDP. There is no doubt that you are an important and key element of the project which has been acknowledged by the Project Manager in their letter of support. However, as your contract states that you are an individual contractor, you do not hold an office within the UN, nor are you an official. If you were an office holder or an official of the UN, you would have the authority to act on their behalf in an official capacity. Rather, you are bound by the contract that you have signed and obliged to perform the duties and responsibilities outlined therein. For this reason you are not entitled to the privileges and immunities provided in the International Organisations (Privileges and Immunities) Act 1963 .