Commissioner of Taxation v Jayasinghe [2017] HCA 26: International Position Not Exempt from Australian Income Tax

Wednesday 9 August 2017 @ 1.10 p.m. | Taxation

Today (9 August 2017), the High Court has unanimously allowed an appeal from the Full Court of the Federal Court of Australia in the case of Commissioner of Taxation v Jayasinghe [2017] HCA 26. The case discusses whether a person who works for, but does not hold an official position with, a United Nations agency is liable to Australian income tax.

Background to the Case

Mr Jayasinghe was a qualified civil engineer.  During the relevant income years, he was engaged by the United Nations Office for Project Services ("UNOPS"), an operational arm of the United Nations ("the UN"), as a "project manager" to build a 190 kilometre gravel road in Sudan.  Mr Jayasinghe was engaged under an "Individual Contractor Agreement" to perform "specialist services" in recognition of his "skills and expertise".  Under that agreement, he had the legal status of an independent contractor of UNOPS, had no authority or other right to enter into any legal or financial commitments or incur any obligations on behalf of UNOPS, was responsible for paying any tax levied by the Australian Government on his UNOPS earnings, and did not have the status of an official of the UN for the purposes of the Convention on the Privileges and Immunities of the United Nations [1949] ATS 3 ("the 1946 UN Convention").  From at least 1 May 2010, he was considered an expert on mission for the UN within the terms of s 22 in Art VI of the 1946 UN Convention.

The Administrative Appeals Tribunal

The Commissioner disallowed an objection lodged by Mr Jayasinghe to notices of amended assessment issued to him for his earnings from UNOPS.  The Administrative Appeals Tribunal set aside the Commissioner's decision, concluding that the substance of the relationship between Mr Jayasinghe and UNOPS, and the obligations created and implemented in carrying out the project, were such that he held an office within the meaning of s 6(1)(d)(i) of the International Organisations (Privileges and Immunities) Act 1963 (Cth), and that he was an employee and entitled to the benefit of TD 92/153.

The Full Federal Court

In the case of Commissioner of Taxation v Jayasinghe [2016] FCAFC 79 (9 June 2016), A majority of the Full Court of the Federal Court upheld the Administrative Appeals Tribunal’s findings and dismissed an appeal by the Commissioner. The Court concurred that the engineer, who was an independent contractor engaged by the UNOPS as project manager for the building of a road in Sudan, was exempt both as ‘holding’ an ‘office’ under the International Organisations (Privileges and Immunities) Act 1963 (Cth) and as being an ’employee’ of the United Nations under a 1992 determination by the Commissioner on that topic.

In the High Court

Allowing the Commissioner's appeal, the plurality held that the phrase "a person who holds an office in an international organisation" in s 6(1)(d)(i) directed attention to the structure of the organisation and the person's place within it and was concerned with the incidents of the relationship between a person and an international organisation; which incidents depended on the substance of the terms upon which a person was engaged.  The incidents of the relationship between Mr Jayasinghe and the UN were such that he did not "hold an office" within the meaning of s 6(1)(d)(i).  Further, as Mr Jayasinghe was engaged by UNOPS as an expert, the Court unanimously held that he fell outside the scope of the phrase "person who holds an office" and that the Commissioner was not bound by TD 92/153 to exempt him from taxation.

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Sources:

Commissioner of Taxation v Jayasinghe [2017] HCA 26 and judgment summary

Commissioner of Taxation v Jayasinghe [2016] FCAFC 79 (9 June 2016)

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