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Is a living allowance paid by the United Nations in respect of voluntary work in a foreign country to a non-resident of Australia, assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. The living allowance paid by the United Nations to the non-resident taxpayer is exempt from tax under subsection 23(r) of the Income Tax Assessment Act 1936 (ITAA 1936).

The taxpayer, a non-resident of Australia, is engaged in an overseas voluntary position with the United Nations.

The taxpayer is paid a monthly living allowance by the United Nations.

Subsection 6-5(3) of the ITAA 1997 provides that ordinary income derived by a non-resident directly or indirectly from Australian sources as well as other ordinary income included by a provision on a basis other than having an Australian source is assessable. Statutory income from all Australian sources or included by a provision on a basis other than having an Australian source is also included in a non-resident's assessable income under subsection 6-10(5) of the ITAA 1997.

The source of a living allowance in respect of voluntary work is the place where the services are performed ( French v. FC of T (1957) 98 CLR 398).

Income derived by a non-resident from sources outside of Australia (except where it is specifically included by a provision on a basis other than having an Australian source) is exempt from tax under subsection 23(r) of the ITAA 1936.

The taxpayer is a non-resident of Australia and the living allowance is not paid from an Australian source. The allowance is not included in the taxpayer's assessable income on another basis, therefore the allowance will not be assessable under section 6-5 of the ITAA 1997. Subsection 23(r) of the ITAA 1936 will apply to exempt from tax the living allowance paid to the taxpayer.