Edited version of private advice

Authorisation Number: 1051808251320

Date of advice: 26 February 2021

Ruling

Subject: Income tax exemption

Question

Is the ordinary income or statutory income derived by the Entity exempt income under subsection 6-20(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

This ruling applies for the following periods:

1 July XXXX to 30 June XXXX

The scheme commences on:

1 July XXXX

Relevant facts and circumstances

The Entity

The Entity was established by the Foreign Government as an investment fund.

The Foreign Government and other Sovereign Governments have contributed to the Entity.

Regulations declare the Entity to be an international organisation for the purpose of the International Organisations (Privileges and Immunities) Act 1963 (IOPI Act 1963).

The Regulations provide the Entity with an exemption from direct taxation on the income, property, and assets of the Entity.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 6-20(1)

International Organisations (Privileges and Immunities) Act 1963

Reasons for decision

Summary

The ordinary income or statutory income derived by the Entity is considered exempt income under subsection 6-20(1) of the ITAA 1997 due to the operation of the IOPI Act 1963 and the Regulations.

Detailed reasoning

Subsection 6-20(1) of the ITAA 1997 states:

An amount of *ordinary income or *statutory income is exempt income if it is made exempt from income tax by a provision of this Act or another *Commonwealth law.

'Commonwealth law' is defined at subsection 995-1(1) of the ITAA 1997 and means "a law of the Commonwealth".

The IOPI Act 1963 is a law of the Commonwealth and provides for the conferral, by regulation, of privileges and immunities (including specified tax exemptions) on international organisations.

Draft Taxation Ruling TR 2019/D1 Income tax: income of international organisations and persons connected with them that is exempt from income tax (TR 2019/D1) considers the income of international organisations that is exempt under section 6-20 of the ITAA 1997 due to the operation of the IOPI Act 1963.

In relation to an international organisation TR 2019/D1 outlines:

7. Subparagraph 6(1)(a)(ii) of the IOPI Act and items 7 and 8 of the First Schedule to the IOPI Act set out the taxation exemptions that can be conferred on an international organisation to which the IOPI Act applies. They are exemptions from:

•         taxation for the organisation, its income, property, assets and transactions,

•         the liability (including the obligation) to collect taxes, and

•         the taxation of obligations and securities issued or guaranteed by the organisation, and of interest and dividends on such obligations and securities.

8. The IOPI Act applies to an international organisation if regulations declare it to be an international organisation for the purposes of the IOPI Act. The exemptions from taxation outlined in items 7 and 8 of the First Schedule to the IOPI Act apply to an international organisation to which the IOPI Act applies to the extent of and subject to the conditions that are provided in the Regulation for that organisation.

Therefore, for the ordinary income or statutory income derived by the Entity from its Australian investments to be exempt income under subsection 6-20(1) of the ITAA 1997, the following must be met:

•         The Entity must be declared, by regulation, an international organisation for the purposes of the IOPI Act 1963, and

•         The Regulations must confer upon the Entity an exemption from taxation on its income.

International Organisation

Section 5 of the IOPI Act 1963 provides that the Act applies to an international organisation if regulations declare it to be an international organisation for the purposes of the Act.

Regulation 4 of the Regulations declares the Entity to be an international organisation to which the IOPI Act 1963 applies.

Therefore, the Entity is a declared international organisation for the purposes of the IOPI Act 1963.

Privileges and Immunities

Subparagraph 6(1)(a)(ii) of the IOPI Act 1963 allows for regulations to confer upon an international organisation all or any of the privileges and immunities specified in the First Schedule to the IOPI Act 1963.

Paragraph 7 of the First Schedule to the IOPI Act 1963 provides the following:

Exemption of the organisation from the liability to pay or collect taxes other than duties on the importation or exportation of goods and of the income, property, assets and transactions of the organisation from such taxes.

The Regulations outline the privileges and immunities conferred on the Entity and these include the exemption from liability to pay direct taxes on its income which includes income tax.

Conclusion

Therefore, the ordinary income or statutory income derived by the Entity is considered to be exempt income under subsection 6-20(1) of the ITAA 1997 on the basis that the Entity is an international organisation to which the IOPI Act 1963 applies, and is exempt from the liability to pay direct taxes on its income, including income tax, due to the operation of the Regulations.