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Edited version of your written advice
Authorisation Number: 1051389363887
Date of advice: 26 June 2018
Ruling
Subject: Foreign income
Questions and answers
1. Is the income from your contract employment with international organisation A included in your assessable income in Australia?
Yes.
2. Is the income from your contract employment with international organisation B included in your assessable income in Australia?
Yes.
This ruling applies for the following periods:
Year ending 30 June 2018
The scheme commenced on:
1 July 2017
Relevant facts and circumstances
You are a resident of Australia for tax purposes.
You are an Australian citizen.
You have been appointed to the staff of an international organisation A as a consultant on a short term contract. You will work in foreign country A. You expect your assignment to last less than 91 days. You have supplied a copy of your appointment letter.
International organisation A makes payments directly to an account nominated by you.
International organisation A stated in writing to you that they do not withhold taxes from payments made to any Australians operating on the contractual basis they offered to you. You have supplied a copy of this document.
You were employed as a contractual employee by the international organisation B on a mission to foreign country B. The mission lasted less than 91 days. You have supplied a copy of your employment letter.
International organisation B does not withhold tax on payments made to its employees; including you.
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
Income Tax Assessment Act 1936 Section 23AG
International Organisation (Privileges and Immunities) Act 1963
Specialized Agencies (Privileges and Immunities) Regulations 1986
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 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 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 & 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.
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 I of the Fifth Schedule of the IO(P&I)A upon a person who serves on a committee, or, participates in the work of, or, performs a mission on behalf of, an international organisation to which this Act applies.
International organisation A and International organisation B are 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 the IO(P&I)A.
Regulation 9 of the SA(P&I) Regs does not provide any income tax exemption for persons serving on a committee or performing a mission (such as independent consultants) for International organisation A and International organisation B.
In your case you received income as a result of a contract with International organisation A and International organisation B to provide consultancy services. You are not an employee of International organisation A and International organisation B.
Therefore, the income you received as a consultant from International organisation A and International organisation B for the provision of services carried out overseas, is assessable under subsection 6-5(2) of the ITAA 1997.
Additional information
Please note that section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936) sets out the conditions that must be met in order for income earned in overseas employment to be exempt from income tax in Australia. Under this section, where an employee is engaged in continuous foreign service for no less than 91 days, and that service is attributable to the delivery of Australian official development assistance by the person's employer, the employment income is exempt.
The conditions set out in section 23AG of the ITAA 1936 only relate to employment income. Section 23AG of the ITAA 1936 therefore does not apply to you as you are a consultant, and not an employee, of International organisation A and International organisation B.