| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012836373847
Date of advice: 8 July 2015
Ruling
Subject: Foreign sourced income
Question and answer
Is the income received by an Australian resident taxpayer from a consultancy to an International Organisation in Country A assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Yes.
This ruling applies for the following periods:
Year ending 30 June 2015
Year ending 30 June 2016
The scheme commenced in:
1 July 2014
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
You are an Australian resident for tax purposes.
You are currently on a program working with an International Agency in Country A.
Your contract with this organisation shows you as a consultant and not an employee.
You will be paid a daily allowance for expenses depending on your location.
The purpose of this allowance is to cover transport, accommodation, meals and other expenses.
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 Section 6-20
Reasons for decision
Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes 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 purposes of subsection 6-5(2) of the ITAA 1997.
However, subsection 6-15(2) of the ITAA 1997 says 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 (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 Specialised Agencies (Privileges & Immunities) Regulations 1986 (SA(P&I) Regs) may declare an organisation to be an organisation to which the IO(P&I)A applies. The International Organisation is listed as a Specialized Agency in Column 2 of the Schedule to the SA(P&I) Regs.
Subsection 3(1) of the IO(P&I)A defines the term 'international organisation to which this Act applies' to mean an organisation that is declared by the regulations to be an international organisation to which the IO(P&I)A applies, and includes a body established by such an organisation.
Regulation 3 of the SA(P&I) Regs says that each Specialized Agency is an international organisation to which the IO(P&I)A applies, therefore the WHO is an international organisation to which the IO(P&I)A applies.
Entitlement to exemption under the IO(P&I)A depends on whether the taxpayer was engaged as an independent consultant or as a person who held an office in the organisation.
You were engaged as a short term consultant.
Under subregulation 8(1) of the SA(P&I) Regs a person who holds an office, other than a high office, in a Specialized Agency such as the Organisation, has the privileges and immunities specified in Part I of the Fourth Schedule to the IO(P&I)A, including income tax exemption on salaries and emoluments received from the organisation. You are not entitled to the privileges and immunities specified in Part 1 of the Fourth Schedule to the IO(P&I)A as you did not hold an office in the organisation.
Regulation 9 of the SA(P&I) Regs applies to your engagement as a consultant and you are entitled to the privileges and immunities specified in paragraphs 1, 2, 3, 4, 5 and 6 of Part 1 of the Fifth Schedule to the IO(P&I)A, however, income tax exemption is not available for persons serving on a committee or performing a mission (such as independent consultants) for the organisation.
In determining liability to Australian tax on foreign sourced income received by a resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act).
Australia does not have an Agreement with Country A, therefore this does not need to be considered.
Accordingly, the income derived by you as a consultant to the International Organisation in Country A is assessable under subsection 6-5(2) of the ITAA 1997.