Private ruling: Income tax exemption
Date of advice: 16 August 2016
Published: September 2016
Ruling period: Year ended 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2015

Ruling: Questions and answers | 1. Is the income you derived from your employment with Organisation X of the XX assessable in Australia for the period you were based in Country A? | No. | 2. Is the income you derive from the Organisation X of the XX assessable in Australia for the period you are based in Australia? | No

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You entered into a contract to carry out duties for Organisation X. You were based in Country A for the period of the contract. You returned to Australia on completion of the contract and since then have performed the same duties from Australia. Your current contract is still with Organisation X. You have provided correspondence from Organisation X which states that you are an 'official' of Organisation X for the purposes of Article VI of the Convention on the Privileges and Immunities of the Specialized Agencies1948 .

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 Subsection 5(1) | International Organisations (Privileges and Immunities) Act 1963 Part 1 of the Fourth Schedule | Specialised Agencies (Privileges and Immunities) Regulations 1986 Regulation 3 | Specialised Agencies (Privileges and Immunities) Regulations 1986 Subregulation 8(1) | Specialised Agencies (Privileges and Immunities) Regulations 1986 Subregulation 10(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 the provision of 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 income tax. The XX is an organisation to which the IO(P&I)A applies. Paragraph 2 of Part 1 of the Fourth Schedule to the IO(P&I)A provides that a person who holds an office (other than a high office) in an international organisation will be exempt from taxation on salaries and emoluments received from the organisation. Subsection 5(1) of the IO(P&I)A states that the regulations may declare an organisation to be an organisation to which the IO(P&I)A applies. The Schedule to the Specialized Agencies (Privileges & Immunities) Regulations 1986 (SA(P&I) Regulations) lists Organisation X as a specialized agency. Regulation 3 of the SA(P&I) Regulations states that each specialized agency is an international organisation to which the IO(P&I)A applies, therefore Organisation X is an international organisation to which the IO(P&I)A applies. Under subregulation 8(1) of the SA(P&I) Regulations, a person who holds an office (other than a high office) in a specialized agency has the privileges and immunities specified in Part 1 of the Fourth Schedule to the IO(P&I)A, including an income tax exemption on salaries and emoluments received from the organisation. Article VI, Section 19(b) of the Convention on the Privileges and Immunities of the Specialized Agencies1948 (the Convention) provides that 'officials' of a specialized agency (such as Organisation X) will enjoy the same exemptions from taxation in respect of salaries and emoluments paid to them by the specialized agency and on the same conditions as are enjoyed by officials (office holders) of the XX(XX). In your case, you have provided correspondence from the Organisation X that states that your status with Organisation X is that of an official for the purposes of Article VI of the Convention. Therefore, you are entitled to the privileges and immunities specified in Part 1 of the Fourth Schedule to the IO(P&I)A as you hold an office in a specialized agency. Accordingly, the income derived by you as an official of Organisation X is not assessable in Australia. This applies for the period when you were based in Country A. | Detailed Reasoning - Duties performed as a consultant of Organisation X when based in Australia: Although you have been based in Australia since completing your contract in Country A, you are still employed by Organisation X which is part of the XX. Taxation Ruling TR 92/14 Income tax: taxation privileges and immunities of prescribed International Organisations and their staff. contains the Australian Taxation Office (ATO) view on the application of the taxation privileges and immunities available under the IO(P&I)A 1963 to prescribed international organisations and their staff. TR 92/14 specifies that XX organisations are international organisations and that subject to regulations made under the IO(P&I)A 1963 in relation to a particular organisation, the 'holder of an office' in an international organisation may have an exemption from tax on salaries received from the organisation. Paragraph 10 of TR 92/14 indicates that as a general rule, the remuneration received from an International organisation for services rendered in Australia is not exempt from taxation. However, it is necessary to consider the regulations relating to the particular organisation, in this case the XX. Regulations made under the IO(P&I)A 1963 include the XX(Privileges and Immunities) Regulations 1986 (XX(P&I)R 1986) which specify that the IO(P&I)A 1963 applies to the XX. Regulation 10(1) of the XX(P&I)R 1986 deals with the privileges and immunities of office holders (other than high office holders) of the XX and specifies that a person who holds an office in the XX has the privileges and immunities specified in Part 1 of Schedule 4 of the IO(P&I)A 1963. As stated above, paragraph 2 of Part 1 of Schedule 4 of the IO(P&I)A 1963 provides that an officer (other than a high officer) of an international organisation is exempt from taxation on salaries received from the organisation. In your case, you are employed by Organisation X, an organisation of the XX, as a consultant. Accordingly, you are an employee of the XX and therefore a 'person who holds an office' with the XX. As the holder of an office with the XX, the income paid to you by Organisation X while you are employed in your current position will be exempt from income tax in Australia under the combined provisions of section 6-20 of the ITAA 1997, regulation 10(1) of the XX(P&I)R 1986 and Paragraph 2 of Part 1 of Schedule 4 of the IO(P&I)A 1963, regardless of whether you are based in Australia or overseas.