Edited version of private advice

Authorisation Number: 1051912832211

Date of advice: 22 October 2021

Ruling

Subject: Income from international organisation

Question

Is the income you earned as a consultant to the International Organisation in Australia exempt from tax in Australia?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 2020

Year ended 30 June 2021

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You are an Australian resident for taxation purposes.

You provided services on projects in which were managed and controlled by the International Organisation.

You carried out this work in the years ended 30 June 2020 and 30 June 2021

You tendered for the work in 2020 and the work was intended to be performed in a foreign country. The hourly rate tendered was based on the premise that the income would be exempt in Australia.

When you were later awarded the contract the COVID-19 travel restrictions were in place and these forced you to perform the work in Australia.

Relevant legislative provisions

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

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

Income Tax Assessment Act 1997 Section 6-20.

International Organisations (Privileges and Immunities) Act 1963

The specific organisation (Privileges and Immunities) Regulations 1967 sub regulation (X(y)

Reasons for decision

Summary

The income earned from the International Organisation in Australia is not exempt from tax in Australia.

Detailed reasoning

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 consultancy 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 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 Commissioner's guidelines as to the assessability of remuneration derived from International Organisations are dealt with in Taxation Ruling TR 92/14.

Paragraph 12 of TR 92/14 provides that Australia's general policy is that salaries and emoluments received by experts and consultants engaged by international organisations are not exempt from tax in Australia. However, limited exemption is provided under regulations regarding the specific International Organisation.

Sub-regulation X(x) of the specific organisation Regulations provides that a person who is performing, whether alone or jointly with other persons, a mission on behalf of the organisation has the privileges and immunities specified in paragraphs 2, 2A and 5 of Part I of the Fifth Schedule to the IOPIA.

However, sub-regulation X(y) of the specific organisation Regulations provides that salary and emoluments received from the organisation by a person on whom privileges and immunities are conferred by sub-regulation X(x), being a resident of Australia, are not exempt from taxation, to the extent to which they are for services rendered in Australia by a person who is a citizen of Australia.

The term 'emoluments' include payments made to an expert in respect of their services which are remunerations, or at least an 'advantage' obtained as a result of giving those services.

In your case, you are a resident of Australia, and you are paid salary and wages for consultant services carried out in Australia.

The payment you receive for work performed for the organisation in Australia is not exempt from tax under sub-regulation X(x) of the specific organisation Regulations as the payment is an emolument received while performing services in Australia.

While your intention was to perform the duties overseas and the only reason you did not was the COVID-19 travel restrictions this does not change the fact that the work was performed in Australia and the regulations do not provide for an income tax exemption.

The Commissioner does not have a discretion to treat the payment as if the work was carried out overseas.