EXPLANATORY STATEMENT
Issued by authority of the Treasurer for the Minister for Foreign Affairs
International Organisations (Privileges and Immunities) Act 1963
Specialized Agencies (Privileges and Immunities) Amendment Regulations 2022
Section 13 of the International Organisations (Privileges and Immunities) Act 1963 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The Convention on the Privileges and Immunities of the Specialized Agencies, which took effect for Australia in 1986, permits the International Monetary Fund (IMF) and certain World Bank Group (WBG) agencies to specify categories of officials, and the privileges and immunities to which those officials should be entitled. Section 19 of the Convention lists one of these privileges as an income tax exemption for the salary or emoluments paid to them.
A recent Administrative Appeals Tribunal case has revealed that Australia’s implementing legislation does not confer an income tax exemption for the salary or emoluments of individuals performing temporary missions on behalf of the IMF and WBG agencies (Hamilton and Commissioner of Taxation [2020] AATA 1812). The income tax exemption for the salary or emoluments is currently conferred only to those who fall within the definition of ‘high office holder’, ‘office holder’, and ‘person accredited to, or is in attendance at, an international conference convened by an international organisation as a representative’.
The Specialized Agencies (Privileges and Immunities) Amendment Regulations 2022 (the Regulations) provide an income tax exemption for Australian residents performing temporary missions either for the IMF or the three WBG agencies on salaries and emoluments received from the relevant agencies. The Government announced this measure in the 2020-21 Budget on 6 October 2020.
A mission is considered ‘temporary’ if it exists only for a limited duration and is not permanent. Temporary missions could range from a small number of days up to longer periods. For example, a two-year mission with a nominated end date would be considered a ‘temporary mission’. Where an individual undertakes more than one mission or assignment, each mission or assignment would be considered as a separate temporary mission.
A temporary mission can be undertaken by anyone engaged on a contractual basis by the relevant agencies, including experts, consultants, and other individuals.
The Regulations apply in relation to salaries and emoluments received on or after 1 July 2017. This ensures that taxpayers qualify for the exemption retrospectively from 1 July 2017. The changes are wholly beneficial to taxpayers affected by the measure. No person other than the Commonwealth would or may be disadvantaged by the retrospective application.
The Government undertook public consultation on providing this income tax exemption from 25 October 2021 to 5 November 2021. No concerns were raised in the submissions received. The Government also held a direct meeting with the IMF and WBG, who support the making of the Regulations in their current form.
The Regulations are a legislative instrument for the purposes of the Legislation Act 2003. The Regulations will commence the day after they are registered on the Federal Register of Legislation.
A statement of Compatibility with Human Rights is at Attachment A.
ATTACHMENT A
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Specialized Agencies (Privileges and Immunities) Amendment Regulations 2022
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
Consistent with multilateral international conventions to which Australia is a party, the Regulations provide an income tax exemption for Australian individuals performing temporary missions for the International Monetary Fund and three World Bank Group agencies on salaries and emoluments received from the relevant agencies.
Human rights implications
This Legislative Instrument does not engage any of the applicable rights or freedoms, as it is consistent with the Convention on the Privileges and Immunities of the Specialized Agencies to exempt from tax any salaries or emoluments paid to officials of international organisations.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
Overview
The Specialized Agencies (Privileges and Immunities) Amendment Regulations 2022 (F2022L00493) were enacted to address a gap in Australia's implementing legislation regarding the income tax exemption for individuals performing temporary missions on behalf of the International Monetary Fund (IMF) and certain World Bank Group (WBG) agencies. These regulations were introduced under the authority of the International Organisations (Privileges and Immunities) Act 1963, with the intent to align Australia's tax laws with the Convention on the Privileges and Immunities of the Specialized Agencies. The regulations were announced in the 2020-21 Budget and aim to ensure that Australian residents who undertake temporary missions for the IMF and three WBG agencies are exempt from income tax on their salaries and emoluments received from these agencies. This amendment is intended to be retrospective from 1 July 2017 and was developed following public consultation and support from the IMF and WBG.
Scope and Application
The Specialized Agencies (Privileges and Immunities) Amendment Regulations 2022 amend the International Organisations (Privileges and Immunities) Act 1963 by providing an income tax exemption for Australian residents performing temporary missions for the International Monetary Fund and certain World Bank Group agencies. These Regulations apply to individuals engaged on a contractual basis by these agencies, including experts, consultants, and other professionals, who receive salaries and emoluments from these entities. The Regulations apply to missions that are considered temporary, which are defined as those that exist for a limited duration and are not permanent, even if they extend to periods such as two years with a nominated end date. Each mission or assignment is considered a separate temporary mission. The income tax exemption applies to salaries and emoluments received on or after 1 July 2017, ensuring that taxpayers qualify for the exemption retrospectively from that date. The Regulations were developed following consultations and with the support of the International Monetary Fund and the World Bank Group. They are a legislative instrument under the Legislation Act 2003 and will commence the day after registration on the Federal Register of Legislation. The Regulations are compatible with human rights as they align with the Convention on the Privileges and Immunities of the Specialized Agencies and do not engage any of the applicable rights or freedoms.
Key Provisions
The Specialized Agencies (Privileges and Immunities) Amendment Regulations 2022 (the Regulations) amend the International Organisations (Privileges and Immunities) Act 1963 (the Act) to provide an income tax exemption for Australian residents performing temporary missions for the International Monetary Fund and three World Bank Group agencies on salaries and emoluments received from the relevant agencies (section 3(1)). The Regulations apply to salaries and emoluments received on or after 1 July 2017 (section 3(2)), ensuring that taxpayers qualify for the exemption retrospectively from this date. The Regulations are a legislative instrument under the Legislation Act 2003 and will commence the day after they are registered on the Federal Register of Legislation (section 4).
The Regulations impose obligations on Australian residents who are performing temporary missions for the IMF or the three World Bank Group agencies. These residents are entitled to an income tax exemption on the salaries and emoluments they receive from the relevant agencies, provided that the missions are temporary, meaning they exist only for a limited duration and are not permanent (section 3(1)). The Regulations also require that each mission or assignment is considered separately if an individual undertakes more than one mission or assignment (section 3(1)). Additionally, the Regulations require that the income tax exemption applies to anyone engaged on a contractual basis by the relevant agencies, including experts, consultants, and other individuals (section 3(1)).
The Act does not prescribe any specific offences, penalties, or consequences for breach of the Regulations. However, the Government has undertaken public consultation on providing this income tax exemption from 25 October 2021 to 5 November 2021. No concerns were raised in the submissions received. The Government also held a direct meeting with the IMF and WBG, who support the making of the Regulations in their current form. The Regulations are compatible with human rights as they are consistent with multilateral international conventions to which Australia is a party and do not engage any of the applicable rights or freedoms (Attachment A).