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Ruling

Subject: Foreign employment income

Question

Is your foreign employment income exempt from tax in Australia?

Answer

Yes

This ruling applies for the following periods

Year ended 30 June 2010
Year ended 30 June 2011
Year ending 30 June 2012

The scheme commenced on

1 July 2009

Relevant facts and circumstances

You are an Australian resident for taxation purposes.

You are employed by Organisation X which is part of the United Nations (UN).

You are based in Country A.

You are a full-time employee. Your appointments to the UN have been on a temporary or fixed-term basis.

You are a staff member of the UN and subject to the UN's Staff Regulations and Staff Rules.

Your income is exempt from taxation in Country A under an agreement between the UN and the government of Country A.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 6-5(2)
Income Tax Assessment Act 1997 Subsection 6-15(2)
Income Tax Assessment Act 1997 Subsection 6-20(1)

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 taxation purposes includes 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 states that if an amount is exempt income then it is not assessable.

Subsection 6-20(1) of the ITAA 1997 provides that an amount of ordinary income is exempt income if it is made exempt 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.

Taxation Ruling TR 92/14 discusses taxation privileges and immunities of prescribed international organisations and their staff.

The United Nations (Privileges and Immunities) Regulations 1986 (UN(P&I)Regs) were made under the IO(P&I)A. The UN is an international organisation to which the IO(P&I)A applies. Organisation X is a body established by the UN.

Subregulation 10(1) of the UN(P&I)Regs confers on officers (other than high officers) of the United Nations the privileges and immunities specified 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 (paragraph 9 of TR 92/14).

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 employed as a staff member by the UN as part of Organisation X.

As an employee of the UN, paragraph 2 of part 1 of the Fourth Schedule of the IO(P&I)A provides that the income you derive from service with the UN is exempt from tax in Australia.

Accordingly, the income you derive from service with Organisation X is exempt income under subsection 6-20(1) of the ITAA 1997, and is therefore not assessable in Australia under subsection 6-5(2) of the ITAA 1997.