Issue
Is the income received by an Australian resident taxpayer as an official of a body established by an international organisation for the provision of independent professional services carried out in Australia assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. The income received by the Australian resident taxpayer as an official of a body established by the international organisation for the provision of independent professional services carried out in Australia is not assessable under subsection 6-5(2) of the ITAA 1997. The income is exempt from tax under the International Organisations (Privileges & Immunities) Act 1963 (IO(P&I)A) and the regulations made under that Act that relate to the international organisation.
Facts
The taxpayer is a citizen of and a resident of Australia for tax purposes.
The taxpayer has been appointed to an office of a body established by an international organisation. That office is not a high office.
The international organisation is listed in the regulations of the IO(P&I)A.
The taxpayer provides professional services to the body in return for remuneration.
The taxpayer is not an employee.
The taxpayer carries out their activities in Australia.
Reasons for Decision
Subsection 6-5(2) of the 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 professional 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 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.
Subsection 5(1) of the IO(P&I)A provides that the regulations may declare an organisation to be an organisation to which this Act applies.
Paragraph 3(1)(b) of the IO(P&I)A defines the term an 'international organisation to which this Act applies' to mean an organisation that is declared by the regulations to be an international organisation to which this Act applies, and includes a body established by such an organisation.
Subparagraph 6(1)(d)(i) of the IO(P&I)A provides that the regulations may confer all or any of the privileges and immunities set out in Part I of the Fourth Schedule upon a person who holds an office in an international organisation to which this Act applies, not being an office prescribed by the relevant regulations as a high office.
The taxpayer is an official of a body established by an international organisation. Regulations relating to the international organisation have been made under the IO(P&I)A. Therefore, the body established by the international organisation is an international organisation to which the IO(P&I)A applies.
The regulations provide that a person who holds an office in the international organisation, other than a high office, has the privileges and immunities specified in Part I of the Fourth Schedule to the IO(P&I)A.
The taxpayer holds an office in the international organisation. That office is not a high office.
Paragraph 2 of Part I of the Fourth Schedule to the IO(P&I) Act provides an exemption from taxation on salary and emoluments received from the international organisation.
There is nothing in the IO(P&I)A or the regulations which restricts the privileges and immunities afforded to the taxpayer to those circumstances when the taxpayer is performing their duties outside Australia.
Accordingly, as the income is exempt income under section 6-20 of the ITAA 1997, it is not assessable under subsection 6-5(2) of the ITAA 1997.