Edited version of private advice

Authorisation Number: 1052204329673

Date of advice: 15 December 2023

Ruling

Subject:Income derived from an international organisation

Question 1

Does subparagraph 6(1)(d)(i) of the International Organisations (Privileges and Immunities) Act 1963 (Cth) (IOPIA 1963) apply to exempt from income tax, the remuneration you derive from the Organisation on the basis that you are an office holder?

Answer

Yes.

Question 2

Should your circumstances remain the same, does subparagraph 6(1)(d)(i) of IOPIA 1963 apply to exempt from income tax, the remuneration you derive from the Organisation on the basis that you are an office holder?

Answer

Yes.

Question 3

Does subparagraph 6(1)(d)(i) of the IOPIA 1963apply to exempt from income tax, the non-salary benefit allowances you derive from the Organisation on the basis that you are an office holder?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

DD MM 20XX

Relevant facts and circumstances

You are a tax resident of Australia. You have been a tax resident of Australia since you relocated to Australia on or around DD MM 20XX and you intend to remain residing in Australia for the ruling period.

You have been employed by the Organisation since 20XX.

The Organisation is an international organisation to which IOPIA 1963 applies.

Since MM 20XX, you have been engaged in the Role.

You entered into an Individual Contractor Agreement (Your Individual Agreement) with the Organisation on or around DD MM 20XX which is summarised as follows:

Table 1 Summarising Table

Since relocating to Australia, you undertake your activities in relation to the Role from your home office based in Australia.

The location of your office is determined by the Organisation.

You pay for your internet expenses, with computer equipment being provided by the Organisation who also pay for all other expenses related to travel to headquarters.

Your remuneration is not based on production of a result or completion of a project.

You will receive daily subsistence allowance (DSA) based on the monthly DSA rate when official travel is carried out and location of the travel. You have not been on official duty travel recently so have not received DSA.

You received Merit Rewards totalling USD X in MM 20XX for the 20XX performance year.

You received Merit Rewards totalling USD X in MM 20XX for the 20XX performance year.

You are not able to work for any other organisation while you are employed in the Role.

You have not engaged the services of any other party to perform any of the duties involved with the Role

You are considered by the Government of X to be an official of the Organisation.

You state that you would be responsible for correcting any defects if you were to not meet the deliverables of the Your Individual Agreement.

You are not required to obtain professional liability insurance in relation to providing your services for the Organisation.

The Role:

is core to the entire information technology X delivery chain in the relevant area and it has independent existence with ongoing identifiable duties, functions and responsibilities.

exercises overall management responsibility over the cross functional X team for the relevant area who delivers system features maintenance, and support throughout the lifecycle of a X group.

as per the Organisational Chart, the Role currently has X direct reports.

acts as the facilitator and coordinator for the relevant area boards that meets to discuss and prioritise the software and system needs for the Organisation systems.

partners with the relevant business stakeholders and coordinates with senior stakeholders such as Directors and Senior management personnel across all business units.

liaises with vendors who provide relevant X for the Organisation's operations. Makes recommendations and influence the direction of the X developments to best fulfil the business objectives

recruits personnel within the team. This will include identifying resourcing needs and endorsing resourcing needs based on demands, defining levels, terms of reference for positions within the structure. Participates in interview panels to support recruitment to identify appropriate candidates.

Sets team objectives, performance measurements, standards and results expected to ensure timely and client focused services. Monitor implementation and oversee progress.

collaborates with the senior X manager and the other X managers to identify opportunities for better alignment between different X so end to end business processes can be enabled.

provides functional support in the development and review of design activities for system improvements, changes, enhancements and upgrades as they relate to the relevant area.

acts as a project manager for X development

The functions you undertake, and the duties, responsibilities and powers that are attached to the Role are summarised below:

Responsibilities and duties are as follows:

Leading the X team

Acts as a coordinator for the team and provides guidance to the team on relevant matters

Embeds a spirit of learning and continuous development within the team to ensure continued professionalisation of services provided and fine tuning of professional craftsmanship

Sets team objectives, performance measurements and support office to oversee the development of estimates and operational requirements to enable accurate planning with realistic timelines

Establishes team priorities and supervise the implementation of work plans

Promotes teamwork and collaboration by providing the team with clear direction, objectives and guidance to enable them to perform their duties responsibly, effectively and efficiently

Fosters a positive work environment, respectful of both men and women an ensure that the highest standards of conduct are observed.

X vision

Partners with key stakeholders to understand their needs, challenges and objectives. Make recommendations and influence the direction of the X developments, to best fulfill the business objectives. Creates and maintains X roadmap.

Prioritises features in a project to achieve the set strategic goals for the client Collaborates with the senior X manager and the other X managers to identify opportunities for better alignment between different X so end to end business processes can be enabled

Works closely with the IT project management and support office to oversee the development of estimates and operational requirements to enable accurate planning with realistic timelines. Holds responsibility for effective coordination of activities across all stages of the X management.

Acts as project manager for X development/ delivery, bridges gaps and manages dependencies between different business units if and when needed

Requirements gathering and analysis

Gathers and documents requirements and performs analysis to identify key business needs. Assesses client needs utilizing a structured requirements process (gathering, analysing, documenting and managing changes)

Analyses client operation to understand their strengths and weaknesses to uncover opportunities for improvements. Identifies business needs and benefits of the change and detailed requirements. Proactively guides the business on solution possibilities, providing the X expertise needed to lead the business to make decisions

Provides functional support in the development and review of design activities for system improvements, changes, enhancements and upgrades as they relate to the relevant area. Assists in the development of acceptance criteria, test scenarios and test cases for functional testing of solutions delivered by the relevant area.

Data and process design

Collaborates with business functions to perform data and process design. Produces process and data flow design in close collaboration with the relevant area business function as well as other relevant business functions that may be impacted by the change in the process. Ensures that requirements and process design span across wider value delivery processes

Negotiates with business functions to drive the potential realisation of tangible benefits from changes to business processes. Makes recommendations and demonstrate how to best utilise the Organisation business systems to accomplish business objectives.

Powers include:

to negotiate services and contracts with vendors for finance and assets related systems on behalf of the chief information officer to represent the Organisation. You do not have the power to enter into these contracts on behalf of the Organisation.

You are actively involved in the recruitment of personnel for the Organisation, including identifying resourcing needs and endorsing resourcing needs based on demands, defining levels, terms of reference for positions within the structure. You participate in interview panels to support recruitment to identify appropriate candidates.

The activities and duties involved with the Role are related to that position. If you were to leave the Role, it would need to be filled by another person.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

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

Income Tax Assessment Act 1997 section 6-20

International Organisations (Privileges and Immunities) Act 1963 subsection 6(1)

International Organisations (Privileges and Immunities) Act 1963 paragraph 6-1(d)(i)

International Organisations (Privileges and Immunities) Act 1963 paragraph 6-1(e)(i)

International Organisations (Privileges and Immunities) Act 1963 Part 1 of the Fourth Schedule

International Organisations (Privileges and Immunities) Act 1963 Item 2 of Part 1 of the Fourth Schedule

International Organisations (Privileges and Immunities) Act 1963 Part 1 of the Fifth Schedule

International Organisations (Privileges and Immunities) Act 1963 Item 2A of Part 1 of the Fifth Schedule

United Nations (Privileges and Immunities) Regulations 1986 Regulation 3

United Nations (Privileges and Immunities) Regulations 1986 Regulation 10

United Nations (Privileges and Immunities) Regulations 1986 Subregulation 10(1)

Reasons for decision

Question 1

Does subparagraph 6(1)(d)(i) of the International Organisations (Privileges and Immunities) Act 1963 (Cth) (IOPIA 1963) apply to exempt from income tax, the remuneration you derive from the Organisation the basis that you are an office holder?

Answer

Yes.

Question 2

Should your circumstances remain the same, does subparagraph 6(1)(d)(i) of IOPIA 1963 apply to exempt from income tax, the remuneration you derive from the Organisation on the basis that you are an office holder?

Answer

Yes.

Question 3

Does subparagraph 6(1)(d)(i) of the IOPIA 1963apply to exempt from income tax, the non-salary benefit allowances you derive from the Organisation on the basis that you are an office holder?

Answer

Yes.

Summary

The IOPIA 1963 applies to the Organisation and as you hold an office with them you are entitled to the privileges and immunities specified in Part 1 of the Fourth Schedule to the IOPIA 1963. Therefore, under subparagraph 6(1)(d)(i) of the IOPIA 1963 the following is exempt income and not assessable income under section 6-5 of the ITAA 1997.

  the salary derived by you during the ruling period in relation your employment in the Role with the prescribed organisation; and

  the monetary benefits you derive during the ruling period in relation to the Role are not assessable, being the amounts, you received under the DSA and/or the Merit Rewards.

Detailed reasoning

Assessable income

Section 6-5 of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources during the income year. This includes income derived from all overseas sources. However, subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income, then it is not assessable income.

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 IOPIA 1963.

Exemption of income under the IOPIA 1963

Income of tax residents of Australia working for designated international organisations may be exempted from taxation in accordance with the IOPIA 1963. The application of these benefits to persons performing the work of the Organisation is provided in the Relevant Regulations.

The IOPIA 1963 exempts from taxation certain income of a person connected with an international organisation, to the extent 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 specified ways, and

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

The Relevant Regulations state that the Organisation is an organisation to which the IOPIA 1963 applies (Regulation 3).

Subsection 6(1) and Part I of the Second to the Fifth Schedules to the IOPIA 1963 inclusive set out the taxation exemptions that can be conferred upon certain persons currently connected with an international organisation. This includes a person who 'holds an office' in an international organisation (but who is not a holder of a high office) under paragraph 6(1)(d) and Part I of the Fourth Schedule to the IOPIA 1963.

Relevantly, as per item 2 of Part 1 of the Fourth Schedule of the IOPIA 1963, this includes an exemption from taxation on salaries and emoluments received from the international organisation.

Subregulation X(x) of the prescribed organisation regulations states that officers (other than high officers) of the prescribed organisation are entitled to the privileges and immunities specified in Part I of the Fourth Schedule to the IOPIA 1963.

Part 1 of the Fourth Schedule to the IOPIA 1963, states, in part:

        Privileges and Immunities of Officer (other than High Officer) of International Organisation

        1.Immunity from suit and from other legal process in respect of acts and things done in his capacity as such an officer.

        2.Exemption from taxation on salaries and emoluments received from the organisation.

The IOPIA 1963 may also exempt the income of a person who is 'serving on a committee or is participating in the work or performing a mission' under paragraph 6(1)(e)(i) and item 2A of Part I of the Fifth Schedule to the IOPIA 1963. However, Regulation X of the Relevant Regulations concerning persons performing missions for the Organisation does not provide for the exemption from taxation on salaries and emoluments provided by item 2A of Part I of the Fifth Schedule to the IOPIA 1963.

From the above, the payments you received in relation to your engagement with the Organisation will only be exempt from income tax if it can be shown that you hold an office (but not a high office) in the prescribed organisation in undertaking your role.

The Commissioner's view on the meaning of office holder

The terms 'office' and 'office holder' are not defined by the IOPIA 1963 or the ITAA 1997 and therefore, they take their ordinary meaning.

The Commissioner's view on the meaning of office holder is set out in Draft Taxation Ruling TR 2019/D1Income tax: income of international organisations and persons connected with them that is exempt from income tax (TR 2019/D1).

Paragraph 25 of TR 2019/D1 outlines the characteristics of an "office holder" for the purposes of the IOPIA 1963, to be:

  independent existence - the office must exist regardless of the individual who occupies the office from time to time. This means that 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.

The case law on the meaning of office holder

As per South Sydney District Rugby League Football Club Ltd v. News Ltd [2000] FCA 1541 (the South Sydney District Rugby League Football Club Ltd Case), in determining what the nature of a relationship was between two parties it is necessary to look at the form and substance of that relationship. It is not appropriate to adopt the label that one or more parties may have given to the relationship and let that determine what it is.

In FCT v. Jayasinghe [2017] HCA 256 (the Jayasinghe Case) it was discussed in paragraphs 31 and 34 that 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.

Paragraph 37 of the Jayasinghe Case outlines that 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.

Paragraph 38 of the Jayasinghe Case outlines that 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 IOPIA 1963 to confer privileges and immunities to assist organisations to perform their functions, rather than to personally benefit persons connected with the organisation.

Application to your situation

We have taken the following into consideration when determining whether you are an officer holder for the purpose of this ruling:

  The Role is a full-time position that is a permanent office with the Organisation.

  There is no end date specified in Your Individual Agreement for the Role which will remain in effect until terminated under terms and conditions of Your Individual Agreement or by operation of the law.

  You receive a monthly salary and your remuneration is not based on production of a result or completion of a project.

  The Role has an independent existence to the person occupying it that is related to that specific ongoing and continuing role. If you were to leave this position, you would be replaced, and the position would be filled

  You hold significant and defined duties, responsibilities and powers in relation to the Role that attach to the position itself, which includes duties and authority within the Organisation and in some instances having authority to act on behalf of the Organisation.

  You are involved in the recruitment process within the prescribed organisation.

  You lead a team of the Organisation personnel, who report directly to you.

  You are considered a member of the Organisation personnel, performing official prescribed organisation functions.

  You are considered by the Government of X to be an official of the Organisation.

  You are entitled to receive annual leave, maternity leave, and payment for absence due to illness.

Based on the facts of your situation and despite your classification as an individual contractor, it is viewed that the Role involves duties, responsibilities and powers that are indicative of an office holder of an international organisation.

Conclusion

After taking into consideration the nature of your relationship with the Organisation as supported by the cases referenced above, and applying the principles contained in TR 2019/D1 to your situation, the Commissioner considers that you hold an office in an international organisation, being the Organisation.

The IOPIA 1963 applies to the Organisation and as you hold an office with them you are entitled to the privileges and immunities specified in Part 1 of the Fourth Schedule to the IOPIA 1963. Therefore, under subparagraph 6(1)(d)(i) of the IOPIA 1963 the following is exempt income and not assessable income under section 6-5 of the ITAA 1997.

  the salary derived by you during the ruling period in relation your employment in the Role with the Organisation; and

  the monetary benefits you derive during the ruling period in relation to the Role are not assessable, being the amounts, you received under the DSA and/or the Merit Rewards.