Assessability of professional income received by an Australian resident working partly in Australia and partly outside Australia as a consultant to an international organisation

Is the income derived by an Australian resident taxpayer as a consultant to the International Bank for Reconstruction and Development (the World Bank) for the provision of independent professional services, carried out partly in Australia and partly outside Australia, assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes. The income derived by an Australian resident taxpayer as a consultant to the World Bank for the provision of independent professional services carried out partly in Australia and partly outside Australia, is assessable under subsection 6-5(2) of the ITAA 1997. The income is not exempt from tax under the International Organisations (Privileges & Immunities) Act 1963 (the IO(P&I)A) and the Specialised Agencies (Privileges & Immunities) Regulations 1986 (the SA(P&I) Regs) which were made under the IO(P&I)A.

The taxpayer is a resident of Australia for income tax purposes.

The taxpayer was engaged by the World Bank to provide independent professional services in the capacity of a consultant.

Most of the work was performed in Australia and some outside Australia.

The taxpayer is not an officer or employee of the World Bank.

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.

Subparagraph 6(1)(e)(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 Fifth Schedule of the IO(P&I)A upon a person who serves on a committee, or, participates in the work of, or, performs a mission on behalf of, an international organisation to which this Act applies.

The World Bank is listed in the Schedule to the SA(P&I) Regs. The SA(P&I) Regs are made under section 6 the IO(P&I)A.

Regulation 9 of the SA(P&I) Regs does not provide any income tax exemption for persons serving on a committee or performing a mission (such as independent consultants) for the World Bank.

Accordingly, the income derived by an Australian resident taxpayer as a consultant to the World Bank for the provision of independent professional services carried out partly in Australia and partly outside Australia, is assessable under subsection 6-5(2) of the ITAA 1997.