Private ruling: Foreign salary
Published: July 2014
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012
Date scheme commenced: 1 July 2009

Ruling: Q1: Is the income you earned as a consultant to the International Organisation in overseas countries exempt from tax in Australia? | A1: Yes

Relevant facts and circumstances: You are an Australian resident for taxation purposes. You provided consulting services on projects overseas which were managed and controlled by the International Organisation. You have provided copies of these contracts. You worked under the direct supervision and responsibility of the International Organisation technical expert and the local International Organisation mission in the assigned country. You were paid by two companies on behalf of the International Organisation as they are facilitators of payments by the International Organisation.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5(2) | Income Tax Assessment Act 1997 Subsection 6-15(2) | Income Tax Assessment Act 1997 Section 6-20. | International Organisations (Privileges and Immunities Act) 1963 section 3 subparagraph 6(1)(e), Part I Fifth Schedule | XXXX (Privileges and Immunities) Regulations 1967 Regulation 2, Regulation 3, subregulation 7(1), subregulation 7(2)

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 consultancy 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 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 Commissioner's guidelines as to the assessability 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 International Organisation. Sub-regulation 7(1) of the XXXX Regulations provides that a person who is performing, whether alone or jointly with other persons, a mission on behalf of the International Organisation 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 XXXX Regulations provides that salary and emoluments received from the International Organisation 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 International Organisation for work carried out in overseas countries. The payment you receive for work performed for the International Organisation in overseas countries is exempt from tax under sub-regulation 7(1) of the XXXX Regulations as the payment is an emolument received while performing services for the International Organisation overseas. Accordingly, the payments received from the International Organisation for your services to perform a mission in overseas countries are not assessable income under subsection 6-5(2) of the ITAA 1997 as the income is exempt under section 6-20 of the ITAA 1997.