Edited version of private advice

Authorisation Number: 1052274879822

Date of advice: 26 July 2024

Ruling

Subject: International income - international organisation

Question 1

Are you considered a person who holds an office in an international organisation (but who is not a holder of a high office) under the International Organisations (Privileges and Immunities) Act 1963 (Cth) (IOPI Act)?

Answer

Yes.

Question 2

Does subparagraph 6(1)(d)(i) of the IOPI Act apply to exempt you from tax in Australia under section 6-20 of the Income Tax Assessment Act 1997 (ITAA 1997), for the remuneration you derived from the Organisation whilst you are working outside of Australia?

Answer

Yes.

Question 3

Does subparagraph 6(1)(d)(i) of the IOPI Act apply to exempt you from tax in Australia under section 6-20 of the ITAA 1997, for the remuneration you derived from the Organisation whilst you are working in Australia?

Answer

No.

This ruling applies for the following period:

Year Ended 30 June 20XX

The scheme commenced on:

X XXXX 20XX

Relevant facts and circumstances

You are an Australian resident.

You are an Australian citizen.

From XX XXXX 20XX to XX XXXX 20XX, you entered a special short-term ungraded contract with the Organisation as a staff member in the professional category. You worked as a full-time program coordinator, officer in charge.

The Organisation is an international organisation to which the IOPI Act applies.

The Organisation is covered by the Regulations.

You commenced the position following the departure of the organisation chief of mission in country A who went on leave and then transitioned into a new role.

You were responsible for overseeing the operational, administrative, human resources and financial activities of the Country Office, in compliance with relevant organisation rules, regulations and procedures.

You reported to the regional director, the chief of staff at headquarters and was under the direct supervision of the chief of mission in the Organisation.

As the officer in charge, all programme managers, several consultants, and national staff reported to you. You had six staff directly reporting to you but were responsible for the entire mission of sixteen staff in total.

You were required to work the hours set by the Organisation.

You were unable to accept other employment during your role as per the organisation's regulations for full-time international staff members.

Your post description stated your responsibilities and accountabilities.

From XX XXXX 20XX to XX XXXX 20XX, you performed your work duties in Australia.

From XX XXXX 20XX to XX XXXX 20XX, your contract was extended.

From XX XXXX 20XX to XX XXXX 20XX, your contract was extended.

From XX XXXX 20XX to XX XXXX 20XX, you performed your work duties in Australia.

You took XX days of annual leave in Australia, which you accrued from your overseas service.

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

International Organization for Migration (Privileges and Immunities) Regulations 1991

Reasons for decision

Question 1

Are you considered a person who holds an office in an international organisation (but who is not a holder of a high office) under the IOPI Act?

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 IOPI Act.

Exemption of income under the IOPI Act

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

The IOPI Act 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 IOPI Act 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.

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.

Under section X of the Regulations, the Organisation is an organisation to which the IOPI Act applies.

Subsection 6(1) and Part I of the Second to the Fifth Schedules to the IOPI Act 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 IOPI Act.

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

Subsection X(x) of the Regulations states that officers (other than high officers) of the prescribed organisation are entitled to the privileges and immunities specified 1, 2, 3, 4, 5 and 6 of Part I of the Fourth Schedule to the IOPI Act.

However, subsection X(x) of the Regulations states that a person who is a resident of Australia within the meaning of the ITAA 1936 is exempt from taxation on salary and emoluments received from the Organisation for services performed in Australia only if they are not an Australian citizen and at the time of performing the services was in Australia solely for the purpose of performing services for the Organisation.

The IOPI Act 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 IOPI Act. However, the regulations do not provide an exemption from taxation on salaries and emoluments for a person who is serving on a committee or is participating in the work or performing a mission for the Organisation.

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 Commissioner's view on the meaning of office holder is set out in paragraphs 24 to 34 of Draft Taxation Ruling TR 2024/D2 Income tax: exempt income of international organisations and persons connected with them describes.

Paragraph 27 of TR 2024/D2, shows the four positive and negative criteria in considering if someone is an office holder. This is a question of fact, considered on a case-by-case basis. The criteria outlined in paragraph 27 are:

•         4 positive criteria:

o   a position to which certain duties attach - the office must exist within the international organisation regardless of the individual who occupies the office from time to time, that is if an individual vacates that office, the office continues to exist to be filled by another individual

o   duties relating to the performance of the organisation's functions - the office must have identifiable duties, functions and responsibilities or powers

o   a level of authority with respect to the organisation

o   the position of the person within the international organisation, and the duties and authority associated with it, should make it apparent why the privileges and immunities are conferred

•         2 negative criteria, the presence of which would indicate the person is not an office holder:

o   the position places the person outside the organisational structure

o   the position does not provide the person with any defined duties or authority with respect to the organisation and its functions - for example, the role is merely an advisory function.

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 IOPI Act 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 circumstances

The income you have received is from an international organisation to which the IOPI Act applies. Under the prescribed organisation regulations, if you are an officer (other than high officer) of the prescribed organisation you will be entitled to the privileges and immunities specified 1, 2, 3, 4, 5 and 6 of Part I of the Fourth Schedule to the IOPI Act. This includes an exemption from taxation on salaries and emoluments received from the international organisation.

Based on the following, you are considered an officer (other than high officer) of the organisation:

• You worked as a full-time employee.
• Your position description was program coordinator, officer in charge.
• You commenced the office following the departure of the organisation chief of mission in country A who went on leave and then transitioned into a new role. The office existed within the international organisation before you started, and the position will continue to be filled regardless of who occupies the office.
• Your responsibilities and accountabilities which were stated in your post description. You have identifiable duties, functions and responsibilities or power.
• You are part of the organisational structure of the Organisation. You report to someone, and you have six staff directly reporting to you, but were responsible for the entire mission of sixteen staff in total.
• You were unable to accept other employment during your role as per the organisation's regulations for full-time international staff members.

Question 2

Does subparagraph 6(1)(d)(i) of the IOPI Act apply to exempt you from tax in Australia under section 6-20 of the ITAA 1997 for the remuneration you derived from the Organisation whilst you are working outside of Australia?

Summary

You have satisfied the elements that the income was received from an international organisation to which the IOPI Act applies and that you are connected with the international organisation as an officer (other than high officer). You must also satisfy the conditions and other particulars provided in the regulations for the international organisation in order to be entitled to the exemption under section 6-20 of the ITAA 1997.

Subsection 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 1, 2, 3, 4, 5 and 6 of Part I of the Fourth Schedule to the IOPI Act. However, subsection X(x) states that a person who is a resident of Australia within the meaning of the ITAA 1936 is exempt from taxation on salary and emoluments received from the Organisation for services performed in Australia only if they are not an Australian citizen and at the time of performing the services was in Australia solely for the purpose of performing services for the Organisation.

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

You are therefore entitled to an exemption from tax in Australia under section 6-20 of the ITAA 1997, for the remuneration you derived from the Organisation whilst you are working outside of Australia.

Question 3

Does subparagraph 6(1)(d)(i) of the IOPI Act apply to exempt you from tax in Australia under section 6-20 of the ITAA 1997 for the remuneration you derived from the Organisation whilst you are working in Australia?

Summary

However, a person who is a resident of Australia within the meaning of the ITAA 1936 is only exempt from taxation on salary and emoluments received from the Organisation for services performed in Australia only if they are not an Australian citizen and at the time of performing the services was in Australia solely for the purpose of performing services for the Organisation.

You are an Australian citizen and tax resident; therefore, you are not entitled to the exemption for the periods you performed your work duties in Australia.