ATO Interpretative Decision
ATO ID 2003/909 (Withdrawn)
Income TaxAssessability of income received by consultant from international organisation
FOI status: may be released
This ATO ID is withdrawn as it is no longer required following the publication of Draft Taxation Ruling TR 2019/D1 Income Tax: income of international organisations and persons connected with them that is exempt from income tax on 27 March 2019.This document has changed over time. View its history.
Status of this decision: Decision withdrawn 27 March 2019.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Is the income received by an Australian resident taxpayer from an international organisation for the provision of scientific consultancy services, assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?
No. The consultancy income received by an Australian resident taxpayer from the international organisation is not assessable under subsection 6-5(2) of the ITAA 1997 as it is exempt from tax under the International Organizations (Privileges & Immunities) Act 1963 (IO(P&I)A).
The taxpayer is an Australian resident for income tax purposes.
The taxpayer entered into a contract to perform a technical mission for an international organisation.
Under the contract, the taxpayer will provide scientific consulting services.
The taxpayer will provide the services in Australia and in Austria.
The taxpayer does not have a fixed base in Austria.
The taxpayer is not an official of the international organisation.
The taxpayer is not an employee of the international organisation.
Reasons for Decision
Subsection 6-5(2) of the 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 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.
Paragraph 6(1)(e) of the IO(P&I)A provides that the Regulations may confer any or all of the privileges and immunities set out in Part I of the Fifth Schedule upon a person who is serving on a committee of, or participating in the work of, or performing a mission on behalf of, an international organisation.
Regulations relating to the international organisation have been made under the IO(P&I)A.
Those Regulations provide that a person who is performing, whether alone or jointly with other persons, a mission on behalf of the international organisation has all the privileges and immunities specified in Part I of the Fifth Schedule to the IO(P&I)A.
Paragraph 2A of Part I of the Fifth Schedule to the IO(P&I)A provides an exemption from taxation on salary and emoluments received from the organisation.
In determining liability to Australian tax on foreign sourced income received by a resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act).
Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the ITAA 1997 so that those Acts are read as one.
Schedule 27 to the Agreements Act contains the double tax agreement between Australia and the Republic of Austria (the Austrian Agreement).
Article 14(1) of the Austrian Agreement provides that income derived by a resident of Australia in respect of professional services performed in Austria shall be taxable only in Australia unless the taxpayer has a fixed base regularly available in Austria to perform those services.
Article 14(2) of the Austrian Agreement defines the term 'professional services' to include services performed in the exercise of independent scientific activities.
The contract income derived by the taxpayer is in respect of 'professional services' under Article 14(2) of the Austrian Agreement.
As the taxpayer is a resident of Australia for income tax purposes and does not have a fixed base in Austria to perform the services, Australia has sole taxing rights under Article 14(1) of the Austrian Agreement.
As the taxpayer is performing a technical mission on behalf of the international organisation, the income received by the taxpayer is exempt from Australian tax in accordance with the IO(P&I)A and the Regulations relating to the international organisation made under that Act. As the income is exempt income under section 6-20 of the ITAA 1997, it is not assessable under subsection 6-5(2) of the ITAA 1997.Date of decision: 17 September 2003
Year of income: Year ended 30 June 2002International Organizations (Privileges & Immunities) Act 1963
Fifth Schedule, Part I, paragraph 2A International Tax Agreements Act 1953
Schedule 27, Article 14(1)
Schedule 27, Article 14(2)
Diplomatic privileges & immunities
Remuneration to officials of various international organisations