Edited version of private advice

Authorisation Number: 1052040037023

Date of advice: 29 September 2022

Ruling

Subject: International organisations - exempt income

Question 1

Is the income you earned as a consultant to an international organisation for services rendered inside Australia exempt from tax in Australia?

Answer

No.

Question 2

Is the income you earned as a consultant to an international organisation for services rendered outside Australia exempt from tax in Australia?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are an Australian resident for tax purposes and an Australian citizen.

You accepted a contract to work with an international organisation as an expert consultant on an international project. Due to COVID-19 travel restrictions you were unable to travel internationally and completed the work while in Australia by electronic communication.

You received 3 separate payments on 3 separate dates in the relevant income tax year.

You intend to continue to do irregular expert consultancy work for the international organisation in the future.

You anticipate future work will be conducted outside 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

Reasons for decision

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 2019/D1 Income tax: income of international organisations and persons connected with them that is exempt from income tax.

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 rendering the services in Australia and is a resident of Australia for taxation purposes (paragraph 33 of TR 2019/D1).

The regulations of the international organisation provide that salary and emoluments received from the organisation by a person on whom privileges and immunities are conferred, 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 Bank or performing a mission on behalf of the organisation.

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.

Question 1

You are a resident and citizen of Australia, and you are paid for consultant services performed for the international organisation for work carried out in Australia.

The payment you receive for work performed for the international organisation in Australia is not exempt from tax as the payment is an emolument received while performing services for the organisation in Australia.

While your intention was to perform the duties overseas and the only reason you did not was because of 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.

Question 2

Any emoluments paid by the international organisation to you for expert consultancy work while outside of Australia are exempt from income tax as they are covered by privileges and immunities which are conferred by The International Organizations (Privileges & Immunities) Act 1963 (IO(P&I) Act).