ATO Interpretative Decision

ATO ID 2005/28 (Withdrawn)

Income Tax

Assessability of professional income received by an Australian resident as a consultant to an international organisation in Japan
FOI status: may be released

This ATO ID is withdrawn because the Japanese Agreement referred to in this Interpretive Decision has been replaced by a new tax treaty with Japan which, in relation to income tax, will apply to income years commencing on or after 1 July 2009. Despite its withdrawal this ATO ID continues to be a precedential view in respect of decisions for income years up to, and including, the 2008/2009 income year.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Status of this decision: Decision Withdrawn 23 October 2009

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.

Issue

Is the income received by an Australian resident taxpayer from an international organisation in Japan assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. The income received by an Australian resident taxpayer from an international organisation in Japan is not assessable under subsection 6-5(2) of the ITAA 1997 as it is exempt from tax under the International Organisations (Privileges and Immunities) Act 1963 (IO(P&I)A).

Facts

The taxpayer is a resident of Australia for tax purposes.

The taxpayer provided services as a consultant to an international organisation in Japan.

The taxpayer is not an official or employee of the international organisation.

The taxpayer does not have a fixed base available in Japan to perform those services.

The taxpayer received income as a consultant in respect of those services.

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 (Agreements Act).

Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one.

Schedule 6 to the Agreements Act contains the double tax agreement and the protocol between Australia and Japan (the Japanese Agreement). The Japanese Agreement operates to avoid the double taxation of income received by Australian and Japanese residents.

Article 10 of the Japanese Agreement provides that remuneration derived by a resident in Australia in respect of professional services or other independent activities of a similar character shall be taxable only in Australia unless the taxpayer has a fixed base available in Japan to perform those services.

The consultancy income received by the taxpayer is in respect of 'professional services' under Article 10 of the Japanese Agreement. Therefore the consultancy income is taxable only in Australia as the taxpayer does not have a fixed base available in Japan to perform those services.

As the taxpayer is participating in the work 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 under section 6-20 of the ITAA 1997, it is not assessable under subsection 6-5(2) of the ITAA 1997.

Date of decision: 15 November 2004

Year of income: Year ended 30 June 2001 Year ended 30 June 2002 Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1997
   subsection 6-5(2)
   subsection 6-15(2)
   section 6-20

International Organisations (Privileges and Immunities) Act 1963
   paragraph 6(1)(e)
   Fifth Schedule, Part I
   Fifth Schedule, Part I, paragraph 2A

International Tax Agreements Act 1953
   section 4
   Schedule 6
   Schedule 6, Article 10

Related Public Rulings (including Determinations)
Taxation Ruling TR 92/14

Related ATO Interpretative Decisions
ATO ID 2003/909

Keywords
Double tax agreements
Exempt income
International law
International tax
Japan
Remuneration to officials of various international organisations
Treaties

Business Line: Public Groups and International

Date of publication: 21 January 2005

ISSN: 1445-2782

history

	Date:	Version:
	15 November 2004	Original statement
You are here →	23 October 2009	Archived

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