Edited version of private advice

Authorisation Number: 1052310474901

Date of advice: 26 September 2024

Ruling

Subject: International organisation - exempt income

Question

Does section 6-20 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to exempt the payments you received for services performed for the Organisation, on the basis that they are exempted by subsection 6(1) of the International Organisations (Privileges and Immunities) Act 1963 (IOPI Act).

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are an Australian resident for income tax purposes.

From XX XX 20XX to XX XX 20XX, you entered into a contract the Organisation, as an individual consultant.

You have been involved in projects with the Organisation, and all projects will be completed over the 20XX and 20XX financial years.

You were an Australian resident prior to entering into the contract with the ADB and will continue to reside in Australia whilst you carry out your contracted work.

The Organisation is an international organisation to which the IOPI Act applies.

Payments made to you by the Organisation, are subject to conditions specified in the regulations (the Regulations).

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 6-20

International Organisations (Privileges and Immunities) Act 1963

Reasons for decision

Assessable income

Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources during the income year. This includes income derived from all overseas sources.

Income from consultancy 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 provides that if an amount is exempt income, then it is not assessable income.

Exempt 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 IOPI Act 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 IOPI Act 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 IOPI Act applies;

•         The person is connected with the international organisation in one of the specified ways; and

•         The conditions and other particulars provided in the regulations for the international organisation are satisfied in relation to the income of the person.

Your Organisation is an organisation to which the IOPI Act applies. Subsection 6(1)(e) and Part 1 of the Fifth Schedule categorises a person who is serving on a committee, or is participating in the work of, or is performing a mission on behalf of an international organisation.

The Commissioners guidelines as to whether the remuneration derived from international organisations is assessable, are considered in Taxation Ruling 2024/D2 - Income tax: exempt income of international organisations and persons connected with the (TR 2024/D2).

Paragraph 35 of TR 2024/D2 explains that persons who serve on a committee, participate in work of an international organisation, or perform a mission on behalf of an international organisation can be exempted from taxation on salaries and emoluments they receive from the organisation.

Paragraph 41 of TR 2024/D2 states that the exemption discussed in paragraph 35 of TR 2024/D2 may be limited or subject to conditions, particularly where a person is rendering the services in Australia and is a resident of Australia for taxation purposes. To the extent that the exemption is limited or subject to conditions in relation to a particular international organisation, it will be specified in the regulations for that organisation.

With regard to the Organisation, the application of these benefits to persons performing work for the organisation is provided for in the Regulations. Subsection X of Regulations provides that a person who is performing, whether alone or jointly with other person, a mission on behalf of the Organisation has the privileges and immunities specified in paragraphs 2, 2A and 5 of Part I of the Fifth Schedule to the IOPI Act.

However, subsection Y of the Regulations provides that salary and emoluments received from the Organisation by a person to whom privileges and immunities are conferred by subsection X, being a resident of Australia, are not exempt from taxation unless the person is not an Australian citizen and came to Australia solely for the purpose of serving on a committee, or participating in the work, of the Bank or performing a mission on behalf of the Bank.

Application to your circumstances

You are a resident of Australia and received remuneration for consultancy services performed for the Organisation for work carried out in Australia. Further, you did not come to Australia solely for the purposes of carrying out the work.

Therefore, the income you derived while working in Australia is not exempt under the IOPI Act. The amount paid to you is assessable income for the purposes of subsection 6-5(2) of the ITAA 1997.

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