Private ruling: Assessability of foreign salary
Published: June 2012
Ruling period: Year ending 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Questions and answers | Is the remuneration you receive for services performed in Australia for the Bank as a consultant assessable under subsection 6-5(2) of the ITAA 1997? | Yes. | Is the remuneration you receive for services performed in overseas countries for the Bank as a consultant assessable under subsection 6-5(2) of the ITAA 1997? | No.

Relevant facts and circumstances: You are an Australian resident for taxation purposes. You were hired by the Bank as an expert under a contract. You were overseas for a continuous period of XX days with no breaks. Your contract was extended for XX days and during this period you worked in Australia.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2). | Income Tax Assessment Act 1997 Section 6-15. | Income Tax Assessment Act 1997 Subsection 6-15(2). | Income Tax Assessment Act 1997 Section 6-20.

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. 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 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. The Commissioners guidelines as to the assess ability of remuneration derived from International Organisations are dealt with in Taxation Ruling TR 92/14. Paragraph 12 of TR 92/14 provides that Australia's general policy is that salaries and emoluments received by experts and consultants engaged by international organisations are not exempt from tax in Australia. However, limited exemption is provided under regulations regarding the Bank. Sub-regulation 7(1) of the Bank Regulations provides that a person who is performing, whether alone or jointly with other persons, a mission on behalf of the Bank has the privileges and immunities specified in paragraphs 2, 2A and 5 of Part I of the Fifth Schedule to the IOPIA. However, sub-regulation 7(2) of the Bank Regulations provides that salary and emoluments received from the Bank by a person on whom privileges and immunities are conferred by sub-regulation 7(1), being a resident of Australia, are not exempt from taxation, to the extent to which they are for services rendered in Australia. The term 'emoluments' include payments made to an expert in respect of their services which are remunerations, or at least an 'advantage' obtained as a result of giving those services. In your case, you are a resident of Australia, and you are paid salary and wages for consultant services performed for the Bank. The payment you receive for work performed for the Bank in Australia is not exempt from tax under sub-regulation 7(2) of the Bank Regulations as you are a resident of Australia and receive payment for work rendered in Australia. Accordingly the payment is assessable under subsection 6-5(2) of the ITAA 1997. The payment you receive for work performed for the Bank in overseas countries is exempt from tax under sub-regulation 7(1) of the Bank Regulations as the payment is an emolument received while performing services for the Bank overseas. Accordingly the payment is not assessable under subsection 6-5(2) of the ITAA 1997 as the payment is exempt under section 6-20 of the ITAA 1997.

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