Edited version of your written advice

Authorisation Number: 1051499806777

Date of advice: 11 April 2019

Ruling

Subject: Foreign source employment income

Question

Is the remuneration you earn from the Organisation exempt from income tax in Australia?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2019

The scheme commences on:

1 July 2018

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are an Australian citizen and an Australian resident for taxation purposes.

You have accepted an appointment as a short term consultant to the staff of the Organisation, pursuant to which you will provide approximately 30 days of service.

The facts for consideration of your case include your letter of engagement from the Organisation.

The services will be performed entirely in Country A. No services will be performed in Australia.

In performing the services, at all times, you will be under the direction of a Task Team Lead who will be responsible for determining your terms of reference, and for providing guidance, supervision and confirming completion of your work.

During the assignment the Organisation considers you to be a Organisation group staff member and subject to the staff rules currently in effect or as amended from time to time.

As a member of the Organisation staff you are ineligible to also be a vendor or subcontractor to a vendor during the employment period as well as a subsequent cooling off period. You are not otherwise restricted from holding concurrent assignments from other public or private employers.

In answer to a request for further information you provided the terms of reference for your engagement:

In an e-mail in answer to a request for further information you provided the following:

● as part of your engagement you have not been appointed in any capacity to any boards, commissions or other bodies.

● you do not have any people reporting to you.

● the position attaches to you personally under the Appointment. You have not engaged others to undertake any part of the work and nor are you authorised to do so.

● The purpose of the Engagement is to fulfil the Terms of Reference. It could be extended pursuant to a further Letter of Engagement if the Terms of Reference cannot reasonably be completed within the current Letter of Engagement agreed timeframes.

● You have no leave entitlements under the position.

● The Organisation and you negotiate mission days that fits all parties’ availability. Actual hours of work within the period are somewhat flexible, but driven by the mission timeframes, business hours of the other organisation and the amount of time needed to deliver the intended objectives – that is evening and weekend work is common in this kind of work.

● Under the Organisation’s rules staff members holding short term appointments may hold concurrent assignments from other public and private employers.

● If your work outputs and outcomes were found to be materially defective (that is not simple typos or report edits) you would not be obliged to carry out the work again to correct it. The risk of defective work sits with the Organisation group.

● The location of your work is entirely determined by the Organisation, being mainly the offices in Country A. No part of your work will be undertaken in Australia.

All of your work-related expenses are covered by the Organisation, either:

● Paid directly by the Organisation (for example airfares)

● Subject to reimbursement (for example visa fees, accommodation and transportation),

● Provided by the Organisation (for example health and travel insurance) and

● Subject to allowance (for example per diem living expenses)

● •You use your own information technology devices without compensation from the Organisation.

The Organisation staff rules set out further terms and conditions that apply to staff members engaged on a Short Term appointments and as such form part of the facts of the case.

The Organisation has provided general advice in relation to payments it makes to Australians:

The legislative vehicle implementing Australia’s treaty obligations under the Convention is the International Organizations (Privileges and Immunities) Act 1963 (“IO(P&I)A”). Section 6(1)(d)(i) of the IO(P&I)A states, in pertinent part, that:

[s]ubject to this section, the regulations may, either without restriction or to the extent or subject to the conditions prescribed by the regulations –

* * *

(d) confer --

-2-

(i) upon a person who holds an office in an international organization to which this Act applies... all or any of the privileges and immunities specified in Part I of the Fourth Schedule....

The Fourth Schedule, Part I, Section 2, provides that an officer of an international organization is entitled to “[e]xemption from taxation on salaries and emoluments received from the organization.”

The Specialized Agencies (Privileges and Immunities) Regulations, promulgated under the IO(P&I)A provide in relevant part that “a person who holds an office in a Specialized Agency... has the privileges and immunities specified in Part I of the Fourth

Schedule to the Act.” Statutory Rules 1986, No. 67, § 8(1). In Taxation Determination No. TD 92/153, paragraph. 3, the Tax Office observed that:

[a]s a practical matter, if the international organization designates a person as one who holds an office in that organization, we will accept, in the absence of contrary evidence, that this designation is sufficient evidence of the status of that person. If other requirements of the regulation are satisfied, that person will be entitled to the privileges and immunities available to a person who holds an office in that organization.

Relevant legislative provisions

Section 15AB of the Acts Interpretation Act 1901

Income Tax Act 1986

Section 6-20 of the Income Tax Assessment Act 1997

Subsection 995-1(1) of the Income Tax Assessment Act 1997

The International Organisation (Privileges and Immunities) Act 1963

International Tax Agreements Act 1953

Section 357-60 of the Taxation Administration Act 1953

Subsection 357-60(1) of the Taxation Administration Act 1953

The Specialized Agencies (Privileges and Immunities) Regulations 1986

Reasons for decision

Issue 1 – Income exempt on the basis you were an office holder

Issue 1: Are the payments that you received from the Organisation exempt income under section 6-20 of the ITAA 1997 on the basis that you were an office holder under paragraph 6(1)(d) of the IOPIA 1963 (taking into account the Regulations)?

No. You were not an office holder; you were instead an expert or consultant while on short term assignment for the Organisation.

Reasoning

An Australian resident’s assessable income includes all ordinary and statutory income from all sources, whether in or outside of Australia (sections 6-5 and 6-10 of the ITAA 97).

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 IOPIA 1963.

The IOPIA 1963 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 IOPIA 1963 applies

● the person is connected with the international organisation in one of the ways set out in paragraph 32

and

● the conditions and other particulars provided in the regulations for the international organisation (as per paragraph 31) are satisfied in relation to the income of the person.

The IOPIA applies to an international organisation if regulations declare it to be an international organisation for the purposes of the IOPIA.

Subsection 6(1) and Part I of the Second to the Fifth Schedules to the IOPIA 1963 inclusive set out the taxation exemptions that can be conferred upon certain persons currently connected with an international organisation. Relevant to this case, this includes the following:

● a person who holds an office in an international organisation (but who is not a holder of a high office) – as per paragraph 6(1)(d) and Part I of the Fourth Schedule to the IOPIA 1963

and

● a person who is serving on a committee, or is participating in the work or performing a mission – as per paragraph 6(1)(e) and Part I of the Fifth Schedule to the IOPIA 1963 (pertaining to Issue 2)

Relevantly, as per item 2 of Part 1 of the Fourth Schedule and item 2A of Part 1 of the Fifth Schedule this includes an exemption from taxation on salaries and emoluments received from the international organisation.

The Organisation is an organisation to which the IOPIA 1963 applies. This is because it is covered by the Specialized Agencies (Privileges and Immunities) Regulations 1986 (SAPIR 1986) as per the definition of specialised agency in regulation 2, the effect of regulation 3 and item 6 in the table in the Schedule to the regulations. The Organisation is listed as the International Bank for Reconstruction and Development.

Subregulations 8(1) and 8(2) of the SAPIR 1986 provide details on the application of privileges and immunities of current officers (other than high officers) of specialized agencies. Their effect is that such officers are entitled to the privileges and immunities specified in Part I of the Fourth Schedule to the IOPIA 1963 which includes item 2 concerning exemptions from taxation set out in paragraph 32. (Whilst the exemption from duty on exporting personal effects and furniture does not apply due to the SAPIR 1986 that is not relevant to this case).

Therefore the payments that you received in relation to your engagement from the Country A assignment will be exempt from income tax if it can be shown that you are a holder of an office (but not a high office) of the Organisation at the time you were undertaking those assignments. This is a question of fact that needs to be resolved separately for each assignment.

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 support of this, reference is made to paragraphs [134] and [135] of Finn J’s judgment:

[134] 3. It is legitimate for parties to avoid the "unwanted consequences" of a particular category of legal relationship by seeking to cast it in a form that takes it outside that category of relationship: Colbron v St Bees Island Pty Ltd (1995) 56 FCR 303 at 314. But whether or not they are successful in achieving that end does not depend simply upon whether, in an express provision of their agreement, they attribute or deny to their relationship a particular legal character - be this, for example, employer and employee: Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385; principal and principal or principal and agent: Board of Trade v Hammond Elevator Co, above; or partners: Ex parte Delhasse; In re Megevand (1878) 7 Ch D 511. The parties cannot by the mere device of labelling, no matter how genuinely intentioned, either confer a particular legal character on a relationship that it does not possess or deny it a character that it does possess: Ex parte Delhasse, above, at 532; see 2A Corpus Juris Secundum, "Agency", §7; see also the observations of Lord Denning in Massey v Crown Life Insurance Co quoted in the Australian Mutual Provident Society case, above, at 389.

[135] 4. Save where an express labelling provision is shown to be a sham, the provision itself (as a manifestation of the parties' intent) must be given its proper weight in relation to the rest of their agreement and such other relevant circumstances as evidence the true character of their relationship. This may lead to its being disregarded entirely: Ex parte Delhasse, above; Board of Trade v Hammond Elevator Co, above;: or to its being given full force and effect: Australian Mutual Provident Society v Chaplin, above. And such will depend upon whether, given the actual incidents and content of the relationship (ie "the factual relation") to which the parties have consented, they have consented "to a state of fact upon which the law imposes the consequences which result from agency": Branwhite's case, above, at 587; Restatement, Second, Agency, §1 comment b.

The label attached to a relationship is a relevant consideration in making findings and decisions in respect of that relationship. However, as per the South Sydney District Rugby League Football Club Ltd Case it is not appropriate to make decisions solely based on such a label, in particular where the underlying substance of that relationship differs from the label attached to it. Therefore, in determining the outcome of your case it is necessary to look beyond the label of ‘short term consultant’ and examine the substance of the relationship.

‘Office’ and ‘office holder’ are not defined by the IOPIA 1963 and the ITAA 1997 and therefore they should take their ordinary meaning. Care must be taken to ensure that it is read with regard to the context of the statutory provision (as per Certain Lloyd’s [2009] HCA 56 (Lloyds Case) at [23-26]).

The guidance provided in the rulings on what is an office holder

The Commissioner’s views on what is an office holder is set out in in draft Taxation Ruling TR 2019/D1. As per paragraph 27 of TR 2019/D1 a holder of an office can 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.

Taxation Ruling TR 2002/21 considered what an appointment, office, or position under the Constitution or an Australian law is for the purposes of Pay As You Go Withholding purposes.

An appointment, office or position must exhibit the characteristics of an office holder. As per paragraph 25 of TR 2019/D1 the characteristics of an office holder for an appointment, office or position are:

● independent existence – the office must exist regardless of the individual who occupies the office from time to time. This means that if the individual currently occupying the office vacates that office, the office must continue to exist to be filled by another individual

● duties, functions, responsibilities or powers – the office must have identifiable duties, functions, responsibilities or powers other than a mere advisory function. These features of the office (or of the panel, board, committee or tribunal to which the individual has been appointed) would usually be specified in the relevant legislation or statutory instrument [or for a common law situation, foundation document or equivalent document of that nature]

and

● the relevant duties, functions, responsibilities or powers must attach to the office itself, rather than the individual who occupies the office.

As is apparent from the Commissioner’s views and the relevant case law (see paragraphs 44 to 52) in determining who is an office holder it is not sufficient to simply be an employee and thereby be regarded as an office holder. An office holder is someone who has identifiable duties, functions, responsibilities or powers to carry out. It does not include an employee who is merely following the command of a higher ranking person. This does not take away from the fact that an office holder may be an employee – it illustrates however that a person who is an employee is not necessarily or automatically to be taken to be an office holder.

The case law on the meaning of office holder

As discussed in paragraphs [31] and [34] of the Jayasinghe Case 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. As per paragraph [37] of the Jayasinghe Case, 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. As per paragraph [38] of the Jayasinghe Case 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 IOPIA to confer privileges and immunities to assist organisations to perform their functions, rather than to personally benefit persons connected with the organisation (see paragraph 39 of the Jayasinghe Case and paragraph [54] of Macoun v. FCT (2015) 257 CLR 519).

The High Court also affirmed the Commissioner’s view outlined in paragraph 27 of TR 2019/D1 in paragraph [52] of the Jayasinghe Case.

In Edwards v. Clinch [1982] AC 845 it was held that an office was a position of authority to which duties and functions are attached; an independent post, with some degree of permanence, to which successive people can be appointed.

In Federal Commissioner of Taxation v. Sealy (1987) 19 ATR 582 at 286; 87 ATC 5076, which concerned a managing partner of a grazing partnership, Pincus J said:

The word office has a range of meanings. In some contexts, it refers to a position of authority in a governmental or other public organisation. It is difficult to think of any reason why the legislature should have intended to confine the concession to instances in which the terminated position is one of a public character or of any high degree of permanency. Presumably, no one would dispute that the position of managing director of a public company could be regarded as an office.

In Grealy v. Federal Commissioner of Taxation (1989) 20 ATR 403 at 408; 89 ATC 4192 at 4197, which concerned a university lecturer, the Full Federal Court held:

It has to be conceded that the word is capable of a variety of meanings, and its definition greatly troubled the Court of Appeal in Great Western Railway Company v. Bater [1921] 2 KB 128, especially at pp 138 and 142. The word office usually connotes a position of defined authority in an organisation, such as director of a company or tertiary educational body, president of a club or holder of a position with statutory powers. The applicant, like holders of professional employments, is not made an office holder merely because his position has a name.

In AAT Case 8603 93 ATC 148; 25 ATR 1082, Deputy President BJ McMahon dealt with the case of a taxpayer who had been an Inspector of Schools and who became (when that position phased out) a Cluster Director. Paragraphs 14 and 15 read as follows:

14. The word “office” is a word that had been considered in many cases but no satisfactory definition has emerged. As was pointed out in Grealy’s case [Grealy v. Commissioner of Taxation (1989) 24 FCR 405; (1989) 20 ATR 403; (1989) 89 ATC 4192] the word usually connotes a position of defined authority in an organisation, such as a director of a company, or a tertiary education body. Their Honours held (at 4197 column 2) that it was not a word normally applicable to a relatively low level employee, such as a university lecturer. As the court observed the applicant, like many holders of professional employment, is not made an office holder merely because her position has a name.

15. This view was consistently taken by the Boards of Review. For example, in Case K4, 78 ATC 29 [(1978) 22 CTBR (NS) 212], Mr Dempsey suggested that an office connotes something more than substantial, something more in the nature of a continuing executive position, the holder of which has distinct responsibilities. In Grealy’s case itself, their Honours noted that the word “office” usually connoted a position of defined authority. [additional case citations added]

AAT Case 12,178 (1997) 97 ATC 407; (1997) 37 ATR 1174 concerned a taxpayer who received a payment in respect of unused sick leave when he resigned from his position as a Branch Manager after having successfully won a position of Division Director for the same employer (a local council). In determining the case, one of the issues raised was whether the taxpayer was the holder of an office and whether a retirement or termination had occurred. In that case, Senior Member J Block stated:

The test as to whether a position is an office will no doubt usually be one involving questions of fact and degree...

In his findings, Senior Member Block also referred to a few previous cases which looked at the issue of office and at (ATC) 421; (ATR) 1189, he made the following observation:

In Great Western Railway Co v. Bater [1920] 3 KB 266 Rowlett J had held that an office was “a subsisting, permanent, substantive position which had an existence independent of the person who filled it, which went on and was filled in succession by successive holders”.

I consider, with respect, that the meaning attributed to the term “office” by Deputy President Thompson in W31 [Case No VT 87/3438 (1989) 20 ATR 3509; (1989) 89 ATC 307] is for Australian purposes, correct. That test would require that it is a position to which “duties are attached, especially a place of trust, authority or service under constituted authority”. It is thus clear that the restricted UK view is narrow, when contrasted with the less restricted Australian approach. [bold emphasis and additional case citations added]

Your circumstances

The word office connotes a position of defined authority in an organisation, such as a director of a company or the president of a club. The holder of a professional employment is not an office holder merely because the position has a name. An office holder’s position is more than something which is important or substantial within a company.

Your role on assignment is best described as that of an expert or consultant, and not an office holder. As such the substance of your relationship is consistent with that of a contractor and what one would commonly understand a ‘contractual employee’ to be.

You are not an office holder in respect of the assignments you undertook for the Organisation. This is because:

● Independent existence or permanence – the position you occupied as a consultant for your assignment to Country A does not have any permanence to it. Neither prior to or following your appointment to the position was there an adviser to Country A who occupied that position on an ongoing basis. This is opposed to an ‘office’ where the position itself is an ongoing or continuing one, either continuously or for a substantial term even if the person that occupies it at a particular point changes (an example would be the position of Governor General or the position of a Royal Commissioner).

● duties, functions, responsibilities or powers are defined by the office – the position of consultant that you occupied does not have duties, functions, responsibilities or powers as it is purely in an advisory, guidance and training capacity. You did not have any defined duties or authority in relation to the Organisation and it carrying out its functions. As such it cannot be said that your position as a consultant is defined by the duties, functions, responsibilities or powers that you carried out while occupying it. Therefore, as per this factor you would not be regarded as an office holder.

● duties, functions, responsibilities or powers belong to the office – the position of consultant that you occupied does not have duties, functions, responsibilities or powers as it is purely an advisory, guidance and training capacity. Therefore there is no transfer of duties, functions, responsibilities or powers from one occupant of the position to the next one. As none of these things transition from occupant to occupant with the position you would not be regarded as an office holder as per this factor.

Instead, for the assignments that you undertook you would be better regarded as an expert or a consultant. This is on the basis that the assignment:

● is short-term – for diagnostic missions up to two weeks and for standalone short term assignments up to one month which is consistent with an expert or consultant role. This is opposed to an officer holder who would be expected to hold their position for a longer period of time to give stability to the office and allow its duties, functions and responsibilities to be performed in an effective manner.

● is performed in an advisory capacity – the undertaking of work in an advisory, guidance and training capacity which is consistent with an expert or consultant role. Furthermore the work that was undertaken did not include any work concerned with any recommendations or permit for the making of significant decisions. This is opposed to an office holder who has duties, functions and responsibilities within an organisation that go beyond that of merely being an advisor.

● requires deep-level technical skills and knowledge of the subject matter or, for a large subject matter area such as a taxation, a part of the matter – this is consistent with the person being an expert or consultant. This is opposed to an office holder who would be expected to have a more general understanding and broader expanse of knowledge. An office holder would not necessarily be expected to have detailed knowledge as they would have advisers and staff to provide this. In addition an office holder would be expected to have sufficient administrative and contextual knowledge to be able to run their office effectively – which is something that is not required of an expert or consultant.

As such the payments that you have received are not be considered to be exempt income on the basis that you are an office holder of an international organisation under paragraph 6(1)(d) of the IOPIA 1963, taking into account the SAPI Regulations, and section 6 20 of the ITAA 1997.

Issue 2 – Income exempt on the basis you were an expert or consultant

Issue 2: Are the payments that you received from the Organisation exempt income under section 6-20 of the ITAA 1997 on the basis that you were an expert or consultant under paragraph 6(1)(e) of the IOPIA 1963 (taking into account the Regulations)?

No – The regulations pertaining to the Organisation do not confer any privileges and immunities to persons performing a mission or working as experts or consultants for the Organisation. Furthermore, in any case, the section in the regulations that covers experts and consultants, for the international organisation that it applies to, does not confer on any person connected with them in the capacity of performing a mission or working as experts or consultants, an exemption from taxation.

Reasoning

In summary, the IOPIA 1963 does provide for an exemption from income tax of salaries and emoluments received by an expert or a consultant under paragraph 6(1)(e), subject to the provisions of the SAPI Regulations.

The manner, by which section 6 20 of the ITAA 1997 exempts income from taxation that is exempted by the IOPIA in relation to office holders applies equally here in relation to considering exemption on the basis of whether you were an expert or a consultant.

Regulation 9 of the SAPI Regulations provides when privileges and immunities are available to a person performing a mission or a Specialized Agency, of which the Organisation is one. As per paragraph 32 of Taxation Ruling TR 2019/D1 this category includes experts and consultants.

Firstly regulation 9 does not apply to persons connected with the Organisation in any capacity (be it performing a mission or working as experts or consultants). This is because the Organisation is not listed as a Specialized Agency (an organisation) in any of subregulations 9(2), (4), (6) or (8) which set out who regulation 9 applies to.

Secondly, regulation 9 limits the privileges and immunities that are provided to the persons connected with the listed organisations. This does not include privilege 2A in the Fifth Schedule of the IOPIA 1963, which is the exemption from taxation. This means that no person who works for any Specialized Agency, be it performing a mission or working as an expert or a consultant, is conferred an exemption from taxation.

As such the payments that you have received are not considered to be exempt income on the basis that you are performing a mission or working as an expert or consultant under paragraph 6(1)(e) of the IOPIA 1963, taking into account the SAPI Regulations, and section 6 20 of the ITAA 1997.

Issue 3 – Income exempt due to the application of the former TR 92/14 and TD 92/153

Issue 3: If the answer to Issues 1 and 2 is ‘no’, nevertheless are the payments from the Organisation treated as if they were exempt income on the basis that your situation comes within the former TR 92/14 or TD 92/153 (as the Commissioner is bound under section 357 60 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953))?

No – Your circumstances do not come within the former TR 92/14 or TD 92/153.

Reasoning

Section 357-60 of Schedule 1 to the TAA 1953 outlines when Rulings are binding on the Commissioner. As per subsection 357-60(1) of the TAA 1953 the Commissioner will be bound in relation to you if your circumstances come within the terms of the Ruling provided you act in accordance with the Ruling. As per subsection 357-60(2) of the TAA 1953 this will be the case provided you are not prevented from doing so by a time limit imposed by a taxation law. It is not necessary that you rely upon the Ruling at the first opportunity.

The former TR 92/14 and TD 92/153 provided guidance on when the Commissioner would accept a person as being entitled to the exemption from income tax in relation to payments they have received from an international organisation with which they are connected. This is as follows:

TR 92/14

Documentary evidence

14. Documentary evidence would be satisfied by a statement from the relevant International Organisation indicating that a person is engaged by that organisation and the relevant capacity in which the person is engaged (High Office, consultant, etc). [emphasis added]

TD 92/153

3. In determining whether a person holds an office, the relevant international organisation is required to apply these tests. As a practical matter, if the international organisation designates a person as one who holds an office in that organisation, we will accept, in the absence of contrary evidence, that this designation is sufficient evidence of the status of that person. If the other requirements of the regulations are satisfied, that person will be entitled to the privileges and immunities available to a person who holds an office in that organisation.

On the available evidence it is concluded that you were a person who has been engaged as an expert or a consultant (and not as an office holder) as per Issue 1. Therefore it follows that the application of the former TR 92/14 and TD 92/153 do not result in the payments at issue being exempted from income tax.

You have also not provided any documentary evidence from the Organisation containing the information referred to in the relevant paragraphs of the former TR 92/14 and TD 92/153. Furthermore, your letters of engagement with the Organisation provide evidence to the contrary that your circumstances come within those set out in the former TR 92/14 and TD 92/153.

It is noted that for the former TR 92/14 and TD 92/153 to apply, the finding made by an international organisation must be based on the facts and substance of the relationship. As per the South Sydney District Rugby League Football Club Ltd (see paragraphs 37 and 38) a finding by an international organisation which attaches a label to a relationship which is not reflective of its substance would not be acceptable for this purpose.

Issue 4 – Income exempt on the basis of treaty law

Issue 4: If the answer to Issues 1, 2 and 3 is ‘no’, nevertheless are the payments from the Organisation treated as if they were exempt income as not doing so would be in breach of Australia’s obligations under international treaties?

No. Taxation is determined under the domestic law.

Reasoning

A number of High Court decisions make it clear that Australian law only incorporates treaties to the extent that the provisions of the treaty have been incorporated into Australian domestic law.

In Simsek v. Macphee 148 CLR 636; [1982] HCA 7 (the Simsek Case) Stephen J established the position that provisions of an international treaty to which Australia is a party do not form part of Australian law unless those provisions have been validly incorporated into Australian domestic law by statute

Further consideration of the matter was given by the High Court in CPCF v. Minister for Immigration and Border Protection [2015] HCA 1 at [488] to [491] where Gagelar J stated (relevant footnotes citing further cases on the matter are also reproduced):

Has the power been abrogated?

488. The plaintiff contended that, if the Court were to hold that a non-statutory executive power to prevent persons from entering Australia does exist, then that power was abrogated by the Act and the Migration Act, both of which were said to operate as part of a single statutory scheme, displacing any non-statutory executive power with respect to the exercise of power concerning immigration into Australia.

489. In Ruddock v Vadarlis, the Full Court of the Federal Court of Australia held [343], by majority, that the Migration Act did not abrogate executive power in this regard. The plaintiff argued that that case was wrongly decided. That argument should be rejected.

490. Powers exercisable by the Executive government under the common law are not limited by international law obligations not incorporated into domestic law[344]. The provisions of an international treaty to which Australia is a party do not form part of Australian law unless those provisions have been validly incorporated into our municipal law by an Act of the Commonwealth Parliament[345]. In point of constitutional principle, an international treaty made by the Executive government can operate as a source of rights and obligations under our municipal law only if, and to the extent that, it has been enacted by the Parliament. It is only the Parliament that may make and alter our municipal law[346].

491. In Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam[347], McHugh and Gummow JJ observed that:

"in the case law a line has been drawn which limits the normative effect of what are unenacted international obligations upon discretionary decision-making under powers conferred by statute and without specification of those obligations... [S]uch obligations are not mandatory relevant considerations attracting judicial review for jurisdictional error."

(emphasis added)

The issue was also considered, and the earlier principle established by the High Court was applied by the High Court in NAGV and NAGW and Minister for Immigration and Multicultural and Indigenous Affairs & Anor [2005] HCA 6 where in a joint judgement Gleeson CJ, McHugh J, Gummow J, Hayne J, Callinan J and Heydon J stated:

However in Simsek v Macphee (1982) 148 CLR 636 at 641-643, Stephen J applied the accepted general preposition that in the absence of legislation the Convention had no legal effect in Australian municipal law upon the rights and duties of individuals and of the Commonwealth....

Furthermore Parliament may not accept or only partly accept the terms of a treaty (or convention which is a treaty) which means that not all of the treaty may be enacted into law. This was recognised in Plaintiff M47/2012 v. Director General of Security [2012] HCA 46 (the Plaintiff M47/2012 Case) where Heydon J stated:

Those submissions may be accepted for the purpose of the proceedings. However, the legislature may well decide not to adopt the whole of a treaty that the Executive has entered. "[T]he purposes of international instruments are not necessarily to be pursued at all costs. The purpose of an instrument may instead be pursued in a limited way, reflecting the accommodation of differing viewpoints, the desire for limited achievement of objectives, or the constraints imposed by limited resources. The authorities which the plaintiff relied on did not state that the Act gives effect to the whole of the Convention. It is notorious that it does not. The relevant question is what the Act provides, not the Convention.

Therefore in order to determine whether the income that you have received from the Organisation is exempt income it is necessary to apply the domestic law that has been enacted. It is not appropriate to interpret a treaty or treaties and then draw the conclusion because an amount is to be regarded as exempt income that it is actually exempt in Australia. This is particularly so, because as per the Plaintiff M47/2012 Case a choice may have been made by Parliament to only partly accept (and enact) the terms of a treaty. Enacting can include legislating a new Act or putting in place subordinated legislation, such as Regulations to an existing act, to give effect to a treaty.

The IOPIA 1963 is a domestic Commonwealth law that implements Australia’s, (the Commonwealth’s), obligations under International Treaties that the Australian government (the executive), has agreed to and ratified to the extent that it has been enacted. In respect of the IOPIA 1963 this includes the UN Convention on the Privileges and Immunities of the Specialized Agencies, together with Annex IV (the Specialized Agencies Convention), that was adopted by the General Assembly of the United Nations on 21 November 1947 and ascended to by Australia on 9 May 1986 (see https://treaties.un.org/Pages/ViewDetails.aspx?src=IND&mtdsg_no=III-2&chapter=3&lang=en).

Australia gave effect to the Specialized Agencies Convention by utilising the IOPIA 1963. This was achieved by implementing the SAPIR 1986. This is acknowledged by the Explanatory Statement to Statutory Rules No. 67, 1986 (being the original SAPIR 1986) which states:

2. In December 1985 the Government decided that Australia would accede to the Convention on the Privileges and Immunities of the Specialized Agencies in respect of the specialized agencies covered by the Convention, and that it should accept the Agreement on the Privileges and Immunities of the International Atomic Energy Agency, without reservations. It also decided to make regulations under the Act to give full effect to Australia’s obligations under the two agreements.

3. The purpose of these Regulations is to give effect to that decision, and to make certain necessary consequential changes to other regulations. Details are set out in Attachment A.

The IOPIA 1963 and the SAPIR 1986 are the domestic law that must be reviewed to determine whether the payments that you have received from the Organisation are exempt income. This has been done in Issues 1 and 2. As found there the payments that you have received are not exempt income either on the basis that you are an office holder or that the income is exempt on the basis that you are an expert or consultant of the Organisation. They would also not be exempt under any other provision of the IOPIA 1963 and SAPIR.

As established by Stephen J of the High Court in the Simsek Case and accepted by the High Court in many other cases since, what matters in these cases is what the domestic law provides. The courts are not bound by the text of the treaties in any way.

Generally, a court will only take into account the words of a treaty in the following circumstances (which do not apply to you):

● enacted legislation provides that the treaties themselves form part of the domestic law (as is the case with taxation treaties which have been given legislative effect through the International Tax Agreements Act 1953)

● as interpretive material in assisting to interpret domestic law as per section 15AB of the Acts Interpretation Act 1901. However this would only be necessary in situations where the provisions of the Act being interpreted are in some way unclear or ambiguous.

Conclusion

You are a consultant providing short term services to the Organisation, you are not an officer of the Organisation, and therefore any income from that source is not exempt from taxation in Australia.

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