Edited version of private advice

Authorisation Number: 1051995065474

Date of advice: 29 June 2022

Ruling

Subject: International organisations - privileges and immunities

Question

Does section 6-20 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to exempt the payments you received from the International Organisation on the basis they are exempted by subsection 6(1) of the International Organisations (Privileges and Immunities) Act 1963 (IOPI Act)?

Answer

Yes.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

26 July 20XX

Relevant facts and circumstances

You are an Australian citizen.

You are a tax resident of Australia.

You commenced permanent employment with an International Organisation.

It was both your and the International Organisation's intention that you relocate to the Country A to carry out your employment, however as a consequence of the COVID-19 pandemic you performed your employment in Australia for a period of about 10 months after commencement.

Your role has an independent existence and exists regardless of the individual who occupies the position.

Your role has defined duties, functions and responsibilities within the Division, and you have direct reports within the Division to which you are accountable.

Your role has the same leave entitlements as all other staff in the International Organisation.

You relocated to the Country A after about 10 months to carry out your employment with the International Organisation from the Country A going forward.

The International Organisation has borne the cost of your relocation from Australia to the Country A.

From when you moved to Country A, your accommodation is subsidised by the International Organisation and they paid for your airfare to Country A. The International Organisation also pay your telephone charges and have provided you with a laptop and mobile phone.

There will be other one-off benefits for relocating and educational expense coverage for your dependants in Country A.

You pay for your own private health insurance.

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

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 Taxation Ruling TR 2019/D1 (TR 2019/D1).

Paragraph 22 of TR 2019/D1 states that a person who holds an office in an international organisation may be exempt from taxation on salary and emoluments received from an international organisation. However, the regulations for international organisations generally preclude this exemption from tax where an 'office holder' is a resident of Australia for taxation purposes and their remuneration is for services rendered in Australia (paragraph 23). However, the regulations of the International Organisation you work for do not limit the privileges and immunities afforded to office holders of the organisation.

In order to determine whether the income you earned from the International Organisation for the relevant period is exempt, it needs to be determined whether you were the holder of an office as per the regulations of the Organisation.

'Office' and 'office holder' are not defined by the IOPI Act or the ITAA 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]).

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 per 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 IOPI Act 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.

You are considered to be an office holder. This is because (as per paragraph 25 of the TR 2019/D1):

•         independent existence or permanence - Your position exists regardless of who occupies the role, and the role is listed on the organisational chart of the International Organisation.

•         duties, functions, responsibilities or powers are defined by the office - the job description for the role lists a number of identifiable duties, functions and responsibilities. These involve leadership and strategic management of the division, management of services operations, driving and planning organisational resilience and planning and implementing business process transformation, operations management including providing recommendations to senior position in various areas of responsibility, and extensive staff supervision of teams and individuals in the division. Th role also has the authority to determine the scope and methods of achieving objectives and activities within a broad framework that aligns with the International Organisation's developmental goals.

•         duties, functions, responsibilities or powers belong to the office - the above duties functions and responsibilities attach to the office, rather than being dependant on the person who occupies that office. The duties, functions and responsibilities would be passed to the next holder of the office as the division is responsible for performing services that support strategic planning and management of finances, and efficient mobilisation of funds required for the International Organisation's operations. It also ensures delivery of operational and financial commitments through process, system, and team management

Therefore, section 6-20 of ITAA 1997 applies to exempt the payments you received from the International Organisation on the basis they are exempted by subsection 6(1) of the IOPI Act.