Private ruling: Foreign source income
Date of advice: 20 November 2015
Published: January 2016
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Question and Answer | Is your income from an international organisation assessable? | No.

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You are employed by an international organisation assessable. Your employment status is as an official of the organisation. You have been serving as a consultant for several years to the present. You perform your duties in a foreign country under deployment by an Australian organisation. Your contract is renewed after several months and your intention is always to return to Australia at the end of each contract. Contract renewal is always dependent on funding availability. You have been provided with a monthly take-home pay. Salary and wages are usually taxable in a foreign country. However, a foreign country does not impose tax on income earned by employees and contractors of the international organisation. As a consequence, you do not pay tax on your income in a foreign country. Australia does not have a double tax treaty with a foreign country. You are travelling on a regular Australian passport but with a certificate from the international organisation. You have provided a copy of this.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5(2) | Income Tax Assessment Act 1997 Section 6-15 | Income Tax Assessment Act 1997 Section 6-20 | International Organisations (Privileges and Immunities) Act 1963 Subsection 3(1) | Subsection 5(1) | Part 1 of Fourth Schedule | Paragraphs 1, 2,3,4,5 and 6 of Part 1 of the Fifth Schedule | Specialised Agencies (Privileges and Immunities) Regulations 1986 | Regulation 3 Sub-regulation 8(1)

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. 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 says 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. Subsection 5(1) of the IO(P&I)A provides that the Specialised Agencies (Privileges & Immunities) Regulations 1986 (SA(P&I) Regs) may declare an organisation to be an organisation to which the IO(P&I)A applies. Subsection 3(1) of the IO(P&I)A defines the term 'international organisation to which this Act applies' to mean an organisation that is declared by the regulations to be an international organisation to which the IO(P&I)A applies, and includes a body established by such an organisation. Regulation 3 of the SA(P&I) Regs says that each Specialized Agency is an international organisation to which the IO(P&I)A applies, therefore your employer is an international organisation to which the IO(P&I)A applies. Entitlement to exemption under the IO(P&I)A depends on whether you were engaged as an Independent consultant or as a person who held an office in the international organisation. You have confirmed that you are employed as an official. Under subregulation 8(1) of the SA(P&I) Regs a person who holds an office, other than a high office, in a Specialized Agency such as the international organisation, has the privileges and immunities specified in Part 1 of the Fourth Schedule to the IO(P&I)A, including income tax exemption on salaries and emoluments received from the organisation. You are entitled to the privileges and immunities specified in Part 1 of the Fourth Schedule to the IO(P&I)A as you have advised that you hold an office in the international organisation. Accordingly, the income derived by an Australian resident taxpayer as holder of an office with the international organisation is not assessable.