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Edited version of private ruling
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Ruling
Subject: Foreign employment income - international organisation
Question
Are the salary and allowances you receive from an international organisation for working in Country X exempt from income tax in Australia?
Answer
Yes
This ruling applies for the following period
Year ending 30 June 2010
Year ending 30 June 2011
The scheme commenced on
1 July 2009
Relevant facts and circumstances
You began working for an international organisation in Country X in the 2009-10 income year.
Your contract is for 12 months.
You are a staff member of the international organisation
You receive a salary and allowances.
Your income is exempt from tax in Country X as officials of the organisation are granted the same exemption form taxation as officials of the United Nations.
Relevant legislative provisions
Subsection 6-5(2) of the Income Tax Assessment Act 1997
Subsection 6-15(2) of the Income Tax Assessment Act 1997
Section 6-20 of the Income Tax Assessment Act 1997
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 for income tax purposes includes ordinary income derived from all sources whether in or out of Australia during the income year.
Income from salary, wages and allowances 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.
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.
Subsection 5(1) of the IO(P&I)A provides that the regulations may declare an organisation to be an organisation to which this Act applies.
Your employer is listed in the Schedule to the Specialised Agencies (Privileges & Immunities) Regulations 1986 (SA(P&I)Regs). The SA(P&I)Regs are made under section 6 of the IO(P&I)A, and your employer is therefore an international organisation to which the IO(P&I)A applies.
Subparagraph 6(1)(d)(i) of the IO(P&I)A provides that the regulations may confer all or any of the privileges and immunities set out in Part 1 of the Fourth Schedule of the IO(P&I)A.
Paragraph 2 of Part 1 of the Fourth Schedule of the IO(P&I)A provides for an exemption from taxation on salaries and emoluments received from an international organisation by an officer (other than a high officer) of the organisation.
Taxation Determination TD 92/153 provides that the phrase 'person who holds an office' in relation to a prescribed international organisation includes those people who work as employees for that organisation.
In your case, you are working in Country X as an employee of an international organisation for a period of 12 months. As a holder of an office of an international organisation to which the IO (P&I)A applies, the salary and allowances you receive from working for the organisation in Country X are exempt from tax in accordance with subparagraph 6(1)(d)(i) and paragraph 2 of Part 1 of the Fourth Schedule of the IO(P&I)A.
Accordingly, as your foreign employment income is exempt under a Commonwealth law, it is exempt from income tax in Australia under section 6-20 of the ITAA 1997, and is not assessable in Australia under subsection 6-5(2) of the ITAA 1997.