Edited version of private advice

Authorisation Number: 1051733465372

Date of advice: 19 August 2020

Ruling

Subject: Foreign income

Question

Is the income earned from the Organisation exempt foreign income for Australian tax purposes?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2020

Year ending 30 June 2021

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You are an Australian resident for tax purposes.

You are a citizen of Australia.

You signed a contract with the organisation with the possibility of extension.

You had various duties and responsibilities.

All of your work is home based and is carried out in Australia.

The contract is short term for several months and can be extended if funding and performance requirements are met.

The position is an existing position.

You are entitled to 2 days annual leave per month.

Your hours of work are determined by the organisation with some flex ability.

You are not able to work for anyone else while undertaking this contract.

You are not responsible for any staff as part of your duties with the organisation.

You are a member of a team.

You are paid monthly and paid for all of your own expenses in relation to phone etc as you work from home in Australia.

Relevant legislative provisions

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

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

Income Tax Assessment Act 1997 Section 6-20

The International Organisations (Privileges and Immunities) Act 1963 Subsection 3(1)

The International Organisations (Privileges and Immunities) Act 1963 Subsection 5(1)

The International Organisations (Privileges and Immunities) Act 1963 subparagraph 6(1)(d)(i)

Reasons for decision

Assessable income - general

Income from professional services is ordinary income for the purposes of subsection 6-5(2) of the Income Tax Assessment Act 1997 (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 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.

The IO(P&I)A exempts from taxation certain income of a person connected with an international organisation, to the extent that it satisfies all of these elements:

·         the income is received from an international organisation to which the IO(P&I)A applies

·         the person is connected with the international organisation in one of the ways set out subsection 6(1) of the IO(P&I)A

and

·         the conditions and other particulars provided in the regulations for the international organisation are satisfied in relation to the income of the person.

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.

Subsection 6(1) and Part I of the Second to the Fifth Schedules to the IOPIA 1963 inclusive set out the taxation exemptions that can be conferred upon certain persons currently connected with an international organisation. Relevant to your case, this includes the following:

·         a person who holds an office in an international organisation (but who is not a holder of a high office) - as per paragraph 6(1)(d) and Part I of the Fourth Schedule to the IO(P&I)A

Relevantly, as per item 2 of Part 1 of the Fourth Schedule this includes an exemption from taxation on salaries and emoluments received from the international organisation.

The organisation is an Agency to which the IO(P&I)A applies.

Regulation X of the relevant organisation regulations provides that a person who holds an office in the organisation, other than a person that is a high office holder, has the privileges and immunities specified in Part 1 of the Fourth Schedule to the IO(P&I)A 1963, which includes exemption from taxation on salaries and emoluments received from the organisation.

This same regulation states that for residents of Australia, the work for the organisation undertaken in Australia is only exempt from taxation if they are not a citizen of Australia.

Therefore, the payments you receive from the organisation are not exempt from tax in Australia as you are a citizen of Australia as per regulation X and you performed all your services to the organisation in Australia.

Accordingly, the income derived by you as a consultant for the organisation is assessable under subsection 6-5(2) of the ITAA 1997.