Private ruling: Exempt income - international organisations - office holder
Date of advice: 27 September 2022
Published: December 2022
Ruling period: Income year ended 30 June 20XX | Income year ended 30 June 20XX | Income year ending 30 June 20XX | Income year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1:  | A1: The amounts you receive as salary, and the monetary benefits in the form of allowance and reward amounts from the Organisation are exempt from income tax.

Relevant facts and circumstances: You have been employed by the Organisation for several years in different positions. The Organisation an agency of Organisation X which is an international organisation to which The International Organisations (Privileges and Immunities) Act 1963 applies. The Organisation's headquarters are located in an overseas country. You commenced your current position (the Role) during the ruling period initially for a probationary period of some months before entering into an Agreement which is summarised as follows: • No end date to the Agreement • Payment on a monthly basis for a specified amount; and • Entitlement to specified number of days of annual leave, maternity/paternity leave. The Role is a full-time position that is a permanent office that relates to a secretariat involving the management of a portfolio of product areas and projects, having a project coordination role in managing the secretariat and being responsible for its output which involves the following responsibilities: • Managing international projects • Leadership, management and co-ordination of teams consisting of managers and team members • Negotiating and approving contracts/projects in international settings • Performing a significant role in recruitment, performance management and appraisals • Solutions/system design; and • Knowledge management and innovation. You have specified duties, responsibilities, and powers in relation to the Role in the organisation. You are not able to work for any other organisation while you are employed in the Role and are responsible for the entire body of work in relation to the Role. You believe that you would be responsible for correcting any defects if you were to meet the deliverables of the Agreement. The activities and duties involved with the Role are related to that position and if you were to leave the Role the position would need to be filled by another person. You have not engaged the services of any other party to perform any of the duties involved with the Role. You are not required to obtain professional liability insurance in relation to providing your services for the Organisation. You undertake your activities in relation to the Role from a home office based in Australia due to the pandemic situation, with your stakeholders spread across the world. The location of your office was determined by the Organisation. You pay for your internet expenses, with computer equipment being provided by the Organisation who also pay for all other expenses related to travel to headquarters. You have received the following monetary benefit amounts: • Travel allowance amount - You have travelled once since being in the Role when you travelled to the Organisation's overseas headquarters and received an amount of travel allowance in relation to your travel. • Future travel allowance amounts will be subject to official travel and location of travel only. You expect to travel several time per year to the Organisation's headquarters. • Reward amounts. You have received a Reward amount from the Organisation and anticipate receiving an amount in each future year during the ruling period dependant on the performance of the Organisation. You were, and will continue to be, a resident of Australia for taxation purposes during the ruling period.

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 Section 6-20 | The International Organisations (Privileges and Immunities) Act 1963 Subsection 6(1) | The International Organisations (Privileges and Immunities) Act 1963 Part 1 of the Fourth Schedule

Reasons for decision: Summary: The International Organisations (Privileges and Immunities) Act 1963 (the IOPI Act) applies to the Organisation, and you are viewed as being an officer holder of the Organisation. Therefore, your salary in addition to the monetary benefits you received in relation to the Travel allowance and Reward amounts, are exempt income under subparagraph 6(1)(d)(i) of IOPI Act. | Detailed Reasoning - Assessable income: An Australian resident's assessable income includes all ordinary and statutory income from all sources, whether in or outside of Australia under sections 6-5 and 6-10 of the Income Tax Assessment Act 1997 (ITAA 97). | Detailed Reasoning - Exempt income: An amount is exempt income under section 6-20 of the ITAA 1997 if it is made exempt from income tax by a provision of either the ITAA 1997 or another Commonwealth law. This includes income received by a person who is connected with an international organisation that is exempted by the IOPI Act. The IOPI Act exempts from taxation certain income of a person connected with an international organisation, to the extent it satisfies all of these elements: • the income is received from an international organisation to which the IOPI Act applies • the person is connected with the international organisation in one of the ways set out below; and • the conditions and other particulars provided in the regulations for the international organisation are satisfied in relation to the income of the person. The IOPI Act applies to an international organisation if its regulations declare it to be an international organisation for the purposes of the IOPI Act. Subsection 6(1) and Part I of the Second to the Fifth Schedules to the IOPI Act inclusive set out the taxation exemptions that can be conferred upon certain persons currently connected with an international organisation. This includes a person who holds an office in an international organisation (but who is not a holder of a high office) under paragraph 6(1)(d) and Part I of the Fourth Schedule to the IOPI Act. Relevantly, as per item 2 of Part 1 of the Fourth Schedule of the IOPI Act, this includes an exemption from taxation on salaries and emoluments received from the international organisation. | Detailed Reasoning - Holding an office and/or being a office holder: As per South Sydney District Rugby League Football Club Ltd v. News Ltd [2000] FCA 1541 (the South Sydney District Rugby League Football Club Ltd Case ), in determining what the nature of a relationship was between two parties it is necessary to look at the form and substance of that relationship. It is not appropriate to adopt the label that one or more parties may have given to the relationship and let that determine what it is. In FCT v. Jayasinghe [2017] HCA 256 (the Jayasinghe Case ) it was discussed in paragraphs 31 and 34 that the term 'office' cannot be defined by reference to permanence or succession. Whether a person holds or performs the duties of an office in an international organisation concerns the relationship between the person and that organisation. Paragraph 37 of the Jayasinghe Cas outlines that the substance of the terms of the engagement of the person and the relationship between that engagement and the organisation's performing its functions must be considered. Whether someone is an office holder is a question of fact, considered on a case-by-case basis. It should be clear from the duties and authority associated with the person's position within the international organisation why the privileges and immunities are conferred. Paragraph 38 of the Jayasinghe Case outlines that a person is unlikely to be an 'office holder' if their terms of engagement place them outside the organisational structure and do not include defined duties or authority in relation to the organisation and its functions. This is consistent with the purpose of the IOPI Act to confer privileges and immunities to assist organisations to perform their functions, rather than to personally benefit persons connected with the organisation. The terms 'office' and 'office holder' are not defined by the IOPI Act or the ITAA 1997 and therefore, they take their ordinary meaning. The Commissioner's view on the meaning of office holder is set out in draft Taxation Ruling TR 2019/D1. Paragraph 27 of TR 2019/D1 states that a holder of an office may include a person who works as an employee of an international organisation, but it does not include a person (whether an employee or not) who is: • locally engaged and paid an hourly rate, or • engaged as an expert or consultant. An office holder for an appointment, office or position must exhibit the following characteristics of an office holder as outlined in paragraph 25 of TR 2019/D1: • an independent existence - the office must exist regardless of the individual who occupies the office from time to time. If the individual that currently occupies the office vacates that office, the office must continue to exist to be filled by another individual • duties, functions and responsibilities or powers - the office must have identifiable duties, functions, responsibilities or powers other than a mere advisory function; and • the relevant duties, functions, responsibilities, or powers must attach to the office itself, rather than the individual who occupies the office. | Detailed Reasoning - Application to your situation: We have taken the following into consideration when determining whether you are an officer holder with the Organisation: • The Role is a full-time position that is a permanent office with the Organisation • You hold a significant responsibility for managing a portfolio of product areas and projects related to the secretariat, having a project coordination role in managing the secretariat and being responsible for its output • There is no end date specified for the Role which will remain in effect until terminated under terms and conditions of Agreement, or by operation of the law • The Role has an independent existence to the person occupying it that is related to that specific ongoing and continuing role. If you were to leave this position, you would be replaced, and the position would be filled • You hold significant and defined duties, responsibilities, and powers in relation to the Role that attach to the position itself, which includes duties and authority within the organisation and in some instances having authority to act on behalf of the Organisation • You have staff members of the Organisation who report directly to you, and others who report indirectly to you in the Role • You are involved in the recruitment process within Organisation; and • You are entitled to receive annual leave, maternity/paternity leave, and payment for absence due to illness. Based on the facts of your situation it is viewed that the Role involves duties, responsibilities and powers that are indicative of an office holder of an international organisation. | Detailed Reasoning - Conclusion: After taking into consideration the nature of your relationship with the Organisation as supported by the cases referenced above, and applying the principles contained in TR 2019/D1 to your situation, the Commissioner considers that you hold an office in an international organisation, being the Organisation. The IOPI Act applies to the Organisation and as you hold an office with them you are entitled to the privileges and immunities specified in Part 1 of the Fourth Schedule to the IOPI Act. Therefore, under subparagraph 6(1)(d)(i) of the IOPI Act the following is exempt income and not assessable income: • the salary derived by you during the ruling period in relation your employment in the Role with the Organisation; and • the monetary benefits you derive during the ruling period in relation to the Role are not assessable, being the Travel allowance and/or the Rewards amounts you receive.

Subject: Exempt income - international organisations - office holder: Question: Does subparagraph 6(1)(d)(i) of the International Organisations (Privileges and Immunities) Act 1963 apply to exempt from income tax the remuneration and monetary benefits you receive from the Organisation?