Edited version of private advice

Authorisation Number: 1052170491393

Date of advice: 9 October 2023

Ruling

Subject: Foreign income - international organisation

Question 1

Is your salary from your work with the international organisation exempt from tax in Australia under section 6-20 of the Income Tax Assessment Act 1997 (ITAA 1997) whilst you are working outside of Australia?

Answer

Yes.

Question 2

Is your salary from your work with the international organisation exempt from tax in Australia under section 6-20 of the ITAA 1997 whilst you are working in Australia?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are a resident of Australia for taxation purposes.

You are an Australian citizen.

You originally accepted an offer of employment with an overseas organisation in the 20XX income year.

The contract was originally entered into with the overseas organisation's international office in an overseas country.

Your first posting was based overseas and was for a period of 2 years.

A subsequent contract was entered into in the 20XX income year in the same role, for a period of a further 2 years (this was essentially an extension of the original contract for the employment).

Subsequent to this, a further extension to the contract was confirmed for an additional year.

However, unlike the first contract, a small percentage of your work duties under the contract extension will be performed in Australia.

You have no-one reporting to you.

You have not engaged any other person to perform part of the work of the position and you cannot engage other people to perform parts of the work.

The position you have with the organization is an ongoing role and existed before and after you occupied it in the same capacity and manner you occupied it.

You are on an open-ended employment contract with the organization until age XX which is the retirement age in Country A.

The position you hold is not a short-term position.

You have leave entitlements and other similar benefits associated with your employment.

Your hours of work are determined by the organisation.

You are not able to work for any other organisation while working for the overseas organization.

Your remuneration is paid on a monthly basis.

You are not required to rectify any defects or issues that arise in your work.

The position is based in Country B but requires extensive field missions and travel. Since early to mid 20XX work has been done in Australia and various other countries.

The office you work from is a business premises of the overseas organisation or at military locations.

The time working in your position with the overseas organisation in Australia was for several months. This level of time in Australia is unusual. Most of the time spent working in Australia was due to COVID, quarantine requirements and an inability to travel back into Country B due to COVID restrictions.

You pay for internet, health and travel insurance.

You are not reimbursed or otherwise compensated for these expenses. You do not pay accommodation, telephone or travel expenses.

You do not provide any of the tools required to carry out your duties.

The overseas organisation provides you with a computer and a phone.

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 subsection 6-20(1)

International Organisations (Privileges and Immunities) Act 1963

Reasons for decision

An Australian resident's assessable income includes all ordinary and statutory income from all sources, whether in or outside of Australia (sections 6-5 and 6-10 of the ITAA 1997).

An amount is exempt income under section 6- 20 of the ITAA 1997 if it is made exempt from income tax by a provision of either the ITAA 1997 or another Commonwealth law. This includes income received by a person who is connected with an international organisation that is exempted by the International Organisations (Privileges and Immunities) Act 1963 (IOPI Act).

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

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 IOPI Act exempts from taxation certain income of a person connected with an international organisation, to the extent that it satisfies all of these elements:

•                     the income is received from an international organisation to which the IOPIA 1963 applies

•                     the person is connected with the international organisation in one of the ways set out subsection 6(1) of the IOPI Act, and

•                     the conditions and other particulars provided in the regulations for the international organisation are satisfied in relation to the income of the person.

Subsection 3(1) of the IOPI Act defines the term 'international organisation to which this Act applies' to mean an organisation that is declared by the regulations to be an international organisation to which the IOPI Act applies, and includes a body established by such an organisation.

Section XX of the IOPI Act states that regulations may confer upon the ICRC and persons of a kind referred to in the specified ICRC arrangement such privileges and immunities as are required to give effect to the Arrangement between the Government of Australia and the Overseas organisation on a regional headquarters in Australia (the Arrangement) as per in Schedule X of the Overseas organisation's Regulations.

As per Division X of the Overseas organisation's Regulations includes the specific type of representative relating to the role you are undertaking for the work assignment (specific representatives) and as per Division X representatives of the Overseas organisation on temporary missions.

Section X of the Overseas organisation's Regulations confers the specified privileges and immunities on specific representatives of the overseas organisation. For this purpose, such a person is:

(a)          a specific representative of the Overseas organisation, in relation to acts and things done in their capacity in that role, including after he or she has ceased to be a specific representative; and

(b)          a family member of the specific representative.

Section X of the Overseas organisation's Regulations sets out the privileges and immunities that apply to the specific representatives of the Overseas organisation. As part of this subsection x(x) of the Overseas organisation's Regulations provides that the specific representative has immunity from taxation on the salaries and emoluments received from the Overseas organisation.

However, subsection x(x) of the Overseas organisation's Regulations restricts the exemption by providing that it is not available to a specific representative who is an Australian citizen or permanent resident where that person is employed in Australia.

This outcome provided for by the Regulations is consistent with the Arrangement and is therefore within the bounds of the Overseas organisation's Regulations.

Based on the facts you have provided to us you are a specific representative of the Overseas organisation, and you are an Australian citizen.

As such, you are exempt from taxation on your salary, wages or emoluments received from the overseas organisation whilst you are working for the Overseas organisation outside Australia in your capacity as a specific representative.

However, as you are an Australian citizen, in accordance with subsection (X)(x) of the Overseas organisation's Regulations you are not exempt from taxation on your salary, wages or emoluments received from the overseas organisation whilst you are working for the Overseas organisation Australia in your capacity as a delegate.