Edited version of private ruling

Authorisation Number: 1011742296063

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Ruling

Subject: Exemption of income

Question 1

Is the income you receive as an arbitrator on a panel of an international organisation assessable in Australia?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2005

Year ended 30 June 2006

Year ended 30 June 2007

Year ended 30 June 2008

Year ended 30 June 2009

Year ended 30 June 2010

The scheme commences on:

1 July 2004

Relevant facts and circumstances

You are a citizen and resident of Australia.

You were appointed as a permanent member of a panel of arbitrators to an international organisation.

You serve as either a single panellist or a member of a joint panel to determine disputes.

You undertake the work in Australia.

You are paid a fixed fee for each assigned case completed.

Summary

The income you derive as an arbitrator for an international organisation is assessable income in Australia under subsection 6-5(2) of the Income tax Assessment Act 1997.

Detailed reasoning

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.

Income from professional services is ordinary income for the purpose of subsection 6-5(2) of the ITAA 1997.

Section 6-15(2) of the ITAA 1997 provides 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 & Immunities) Act 1963 (IO(P&I) A) is a Commonwealth law under which 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&I0A provides that regulations may declare an organisation of which Australia and a country or countries other than Australia are members to be an international organisation to which this Act applies.

Paragraph 3(1)(b) of the IO(P&I)A defines the term an 'international organisation to which this Act applies' to mean an organisation that is declared by the regulations to be an international organisation to which this Act applies, and includes a body establish by such an organisation.

Subparagraph 6(1)(e) (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 Fifth Schedule upon a person who holds an office in an international organisation to which the Act applies, not being an office prescribed by the relevant regulations as a high office.

You are an official of a body established by an international organisation. Regulations relating to the organisation have been made under the IO(P&I)A. Therefore, the body established by the organisation is an international organisation to which IO(P&I)A applies. The office you hold is not a high office.

Special Agencies(Privileges and Immunities) Regulations 1986 regulation 9 provides that a person who is serving on a committee of a Specialized Agency whether alone or jointly with other persons, a mission on behalf of the organisation has the privileges and immunities specified in paragraphs 1,2,3,4,5 and 6 of Part 1 of the Fifth Schedule to the Act.

Paragraph 2A of Part 1 of the Fifth Schedule of the IO(P&I)A provides an exemption from taxation on salaries and emoluments from the organisation.

Tax exemptions may be available to a higher officer, representative, holder of an office and expert or consultant serving on a committee or participating in the work or performing a mission on behalf of the international organisation. Taxation Ruling TR92/14 states that generally Australia's policy is that experts or consultants are not exempt from the tax in Australia.

Taxation Determination TD92/153 describes who is a 'person who holds an office' as specified in various regulations made under the IO(P&I)A.

Paragraph 2 of TD92/153 takes the view that the phrase 'person who holds an office' in relation to a prescribed international organisation covers those people who work as employees for the organisation. However, it is not accepted that the phrase includes either:

· persons who are locally engaged by the organisation and paid at an hourly rate; or

· persons engaged by the organisation as experts or consultants.

In your case, you do not hold a higher office, not serving on a committee and not performing a mission on behalf of the international organisation. You are not considered an employee as you are paid a fixed fee and appointed to selected cases.

In your case, you do not hold a higher office, not serving on a committee and not performing a mission on behalf of the international organisation. As your work does not fall under the above categories, the income you derive as an arbitrator with the international organisation is not exempt from tax in Australia under the IO(P&I)A.