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Edited version of private ruling

Authorisation Number: 1011578750909

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Ruling

Subject: Foreign source income

Is the income and accommodation allowance you receive exempt from income tax in Australia?

No.

This ruling applies for the following period:

Year ending 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You have a 12 month contract to work overseas for an organisation.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5.

Income Tax Assessment Act 1997 Section 6-15.

Income tax Assessment Act 1997 Section 6-20.

International Organisation (Privileges and Immunities) Act 1963 Section 5.

International Organisation (Privileges and Immunities) Act 1963 Schedule 4.

United Nations (Privileges and Immunities) Regulations 1986 Regulation 3.

United Nations (Privileges and Immunities) Regulations 1986 Regulation 10.

Reasons for decision

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (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 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.

The Commissioner's guidelines as to the assessability of remuneration derived from International Organisations are dealt with in Taxation Ruling TR 92/14.

Paragraph 1 of TR 92/14 states that International Organisations include the United Nations Organisation.

Paragraph 6 of TR 92/14 states that persons engaged by an International Organisation may be accorded privileges and immunities in the nature of exemption from taxation as described in the Second, Third, Fourth and Fifth Schedules of the (IO (P+I) A).

Paragraph 9 of TR 92/14 states that a holder of an office in an International Organisation may have exemption from tax on salaries and emolument received from the organisation.

However, paragraph 12 of TR 92/14 states that generally, Australia's policy is that experts and consultants are not exempt from tax in Australia.

Taxation Determination TD 92/153 provides information as to who is a 'person who holds an office'. The determination states that the Department of Foreign Affairs and Trade (DFAT), who administers the IO (P+I) A and regulations considers that the phrase 'person who holds an office' covers those people who work as employees of the organisation. The DFAT does not accept, however that the phrase includes either:

Accordingly, your remuneration received is not exempt from tax under the IO A. As the income is not exempt income under section 6-20 of the ITAA 1997, it is assessable under subsection 6-5(2) of the ITAA 1997.

You are required to declare your income and accommodation allowance in your tax return.

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