Edited version of private advice

Authorisation Number: 1051983940682

Date of advice: 22 June 2022

Ruling

Subject: International organisations - exempt income

Question 1

Are you a person who holds an office in the international organisation?

Answer

No.

Question 2

Is the income you earned for performing services for an international organisation exempt from tax in Australia?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are an Australian resident for taxation purposes

You are an Australian citizen

You are paid for services performed for an international organisation as part of a program which will run for several years

You carry out the work in Australia

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

The International Organisations (Privileges and Immunities) Act 1963

Reasons for decision

Question 1

A regulation of the international organisation you work for provides that a person who holds an office in the organisation has the privileges and immunities specified in Part I of the Fourth Schedule to the International Organisations (Privileges and Immunities) Act 1963 (IOPI Act). These privileges and immunities include an exemption from income tax on salaries and emoluments received from the organisation.

'Office' and 'office holder' are not defined by the IOPI Act or the Income Tax Assessment Act 1997,therefore, they should take their ordinary meaning. Care must be taken to ensure that it is read with regard to the context of the statutory provision (as per Certain Lloyd's [2009] HCA 56 (Lloyds Case) at [23-26]).

The Commissioner's views on who can be an office holder are set out in in 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).

As per paragraph 27 of TR 2019/D1 a holder of an office can include a person who works as an employee of an international organisation, but it does not include a person (whether an employee or not) who is:

•         locally engaged and paid an hourly rate, or

•         engaged as an expert or consultant.

An appointment, office or position must exhibit the characteristics of an office holder. As per paragraph 25 of TR 2019/D1 the characteristics of an office holder for an appointment, office or position are:

•         independent existence - the office must exist regardless of the individual who occupies the office from time to time. If the individual currently occupying the office vacates that office, the office must continue to exist to be filled by another individual

•         duties, functions, responsibilities or powers - the office must have identifiable duties, functions, responsibilities or powers other than a mere advisory function. These features of the office (or of the panel, board, committee or tribunal to which the individual has been appointed) would usually be specified in the relevant legislation or statutory instrument [or for a common law situation, foundation document or equivalent document of that nature], and

•         the relevant duties, functions, responsibilities or powers must attach to the office itself, rather than the individual who occupies the office.

As is apparent from the Commissioner's views and the relevant case law in determining who is an office holder it is not sufficient to simply be an employee and thereby be regarded as an office holder. An office holder is someone who has identifiable duties, functions, responsibilities or powers to carry out. It does not include an employee who is merely following the command of a higher ranking person. This does not take away from the fact that an office holder may be an employee - it illustrates however that a person who is an employee is not necessarily or automatically to be taken to be an office holder.

Case law on the meaning of office holder

As discussed in paragraphs 31 and 34 of FCT v. Jayasinghe [2017] HCA 256 (the Jayasinghe Case) the term 'office' cannot be defined by reference to permanence or succession. Whether a person holds or performs the duties of an office in an international organisation concerns the relationship between the person and that organisation.

As per paragraph 37 of the Jayasinghe Case, the substance of the terms of the engagement of the person and the relationship between that engagement and the organisation's performing its functions must be considered. Whether someone is an office holder is a question of fact, considered on a case by case basis. It should be clear from the duties and authority associated with the person's position within the international organisation why the privileges and immunities are conferred.

As per paragraph 38 of the Jayasinghe Case, a person is unlikely to be an 'office holder' if their terms of engagement place them outside the organisational structure and do not include defined duties or authority in relation to the organisation and its functions. This is consistent with the purpose of the IO(P&I)A to confer privileges and immunities to assist organisations to perform their functions, rather than to personally benefit persons connected with the organisation (see paragraph 39 of the Jayasinghe Case and paragraph 54 of Macoun v. FCT (2015) 257 CLR 519).

The High Court also affirmed the Commissioner's view outlined in paragraph 27 of TR 2019/D1 in paragraph 52 of the Jayasinghe Case.

Your circumstances

As noted in the paragraphs above, the word 'office' connotes a position of defined authority in an organisation, such as a director of a company or the president of a club. The holder of a professional employment is not an office holder merely because the position has a name. An office holder's position is more than something which is important or substantial within a company.

It is considered that you are not an office holder of the organisation. This is because (as per paragraph 25 of the TR 2019/D1):

•         independent existence or permanence - You have stated that you are deployed on different rotations as part of your position. This demonstrates that your position does not necessarily continue to exist should you depart. Furthermore, your contract isn't specific to a role but rather as part of the program. This is opposed to an 'office' where the position itself is an ongoing or continuing one, either continuously or for a substantial term even if the person that occupies it at a particular point changes.

•         duties, functions, responsibilities or powers are defined by the office - In reference to the supplied information about the program, it is evident that you do not have any defined duties or authority in relation to the organisation and the carrying out of its functions. As such it cannot be said that your position has identifiable duties, functions, responsibilities or powers that you carry out while occupying it.

•         duties, functions, responsibilities or powers belong to the office - As mentioned above, your position does not have identifiable duties, functions, responsibilities or powers.

You are not an office holder of the organisation. Instead, you would be better regarded as 'participating in the work' of the organisation.

Question 2

Subsection 6-5(2) of the 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 employment or services rendered 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 IOPI Act 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 whether remuneration derived from an international organisation is assessable are dealt with in TR 2019/D1.

Paragraph 31 of TR 2019/D1 provides that persons who serve on a committee, participate in the work of, or perform a mission on behalf of an international organisation may be exempted from taxation on salaries and emoluments received from the Organisation.

However, any exemption may be limited or subject to conditions, particularly where the person is not an officeholder and is rendering the services in Australia and is a resident of Australia for taxation purposes (paragraph 33 of TR 2019/D1).

A regulation of the international organisation's regulations provides that a person who is serving on a committee, or is participating in the work, of the organisation or is performing, whether alone or jointly with other persons, a mission on behalf of the International Organisation has the privileges and immunities specified in paragraphs 2, 2A and 5 of Part I of the Fifth Schedule to the Act.

However, another regulation of the organisation provides that salary and emoluments received from the organisation by a person, being a resident of Australia, are not exempt from taxation, to the extent to which they are for services rendered in Australia unless the person is not a citizen of Australia and came to Australia solely for the purpose of serving on a committee, or participating in the work, of the organisation or performing a mission on behalf of the organisation.

In your case, you are a resident and a citizen of Australia, and you are paid salary and wages for services performed for the international organisation for work carried out in Australia.

The payments you receive for work performed for the international organisation in Australia are not exempt from tax under the regulations of the organisation as the payments are an emolument received while performing services for the organisation in Australia.