Private ruling: Foreign income
Date of advice: 11 May 2016
Published: June 2016
Ruling period: Year ending 30 June 2017 | Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Question and answer | Is the income you will derive from your service with the Organisation exempt from tax in Australia? | No


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

Reasons for decision: Summary: 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 the Organisation 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 Organisation. You have confirmed that you are engaged as a short term consultant. 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 #, has the privileges and immunities specified in Part I of the Fourth Schedule to the IO(P&I)A, including income tax exemption on salaries and emoluments received from the organisation. You are not entitled to the privileges and immunities specified in Part 1 of the Fourth Schedule to the IO(P&I)A as you do not hold an office in the Organisation. Regulation 9 of the SA(P&I) Regs applies to the taxpayer's engagement as a consultant and they are entitled to the privileges and immunities specified in paragraphs 1, 2, 3, 4, 5 and 6 of Part 1 of the Fifth Schedule to the IO(P&I)A, however, income tax exemption is not available for persons serving on a committee or performing a mission (such as independent consultants) for the Organisation Accordingly, the income derived by an Australian resident taxpayer as a consultant to the Organisation in country A is assessable under subsection 6-5(2) of the ITAA 1997.

Relevant facts: You are an Australian resident for taxation purposes. | You are being engaged by the Organisation in country A, as a consultant. | The Organisation is part of the United Nations (UN) Organisation, an international organisation with certain privileges and immunities including an exemption from tax. | You are engaged on a # day contract.