The High Court has allowed an appeal against a decision of the Full Federal Court on income tax exemption for officials of international organisations. The respondent was employed as a civil engineer on a United Nations project in Sudan. Section 6(1)(d)(i) of the International Organisations (Privileges and Immunities) Act 1963 (Cth) provides that a person holding an office in an international organisation to which the Act applies (which includes the UN) will have the privilege of, among other things, ‘[e]xemption from taxation on salaries and emoluments received from the organisation’ (sch 4, cl 2). A majority of the FCAFC held that the Administrative Appeals Tribunal was correct in finding that the engineer did hold an ‘office’ under the Act and was an ’employee’ of the United Nations, and was thus exempt from income tax on his income. On appeal to the High Court, the central issues were whether the appellant did hold an office within the meaning of s 6(1)(d)(i), and whether a 1992 determination by the Commissioner (TD 92/153) meant that, even if he was not an officer, he remained exempt from tax as an employee.
The High Court unanimously allowed the Commissioner’s appeal. The plurality (Kiefel CJ, Keane, Gordon and Edelman JJ) held that both questions should be answered in the negative: the appellant did not hold an office, and the 1992 determination did not operate to exempt him from the obligation to pay tax. Turning first to the requirements of ‘office holders’ under the Act, the plurality held that while this is a ‘general’ word, it must be read in context (at ), namely it is not defined by reference to permanence or succession of a position, contrary to common meanings, because the section does not use that criteria and it is ‘not relevantly applicable’ to office holders in international organisations (see –). Instead, the section’s use of the compound term ‘holds an office in’ means it is properly construed as pointing to the relationship between an individual and the organisation: ‘The incidents of that relationship will depend on the terms upon which a person is engaged. Examination of those terms may lead to the conclusion that a person holds an office in an international organisation that is neither permanent nor filled by successive holders.’ (at ). Determining that question requires looking to the substance of the relationship between the person’s engagement and the organisation (rather than the particular label attached to the individual’s position), to the relationship between that position and the performance of the organisation’s functions (at ), and to the duties and authority associated with that position (at ):
The position of the person within the international organisation and the duties and authority associated with it should render explicable why the privileges and immunities are conferred. By comparison, a person whose terms of engagement place them outside the organisational structure, and do not provide that person with any defined duties or authority with respect to the organisation and its functions, could hardly be said to hold an office within the organisation.
This construction is reinforced by other sections of the IOPI Act, its statutory purpose of conferring privileges and immunities for the benefit for the functions of international organisations (rather than for the benefit of particular persons connected to them), and with Australia’s international obligations under the 1946 UN Convention on the Privileges and Immunities of the United Nations. (see –). Turning to the application of the section to the respondent, the plurality held that he did not ‘hold an office in’ the UN: he was engaged in his individual capacity to perform a non-core function (completing a road), was paid monthly as an independent contractor, and did not hold any official status under the 1946 Convention.
On the second question, after laying out the content of TD 92/153 and the rulings of the Tribunal and FCAFC majority (see –) the plurality held that while the respondent was an employee he nonetheless fell outside the scope of the determination because he was engaged by the UN as an ‘expert’ (at ):
As the words of par 2 of the ruling suggest, the phrase ‘person who holds an office’ does not include persons who fall into either of the two listed categories. Therefore, on its natural reading, TD 92/153 provides that a person who works as an employee for a relevant international organisation will not be a ‘person who holds an office’ if that person is also either locally engaged by the organisation and paid at an hourly rate or engaged by the organisation as an expert or a consultant. In other words, if a person falls into one of the two listed categories, they will not be a “person who holds an office” under TD 92/153 – whether they are also an employee is beside the point.
As applied here, while the respondent was an employee and not explicitly engaged as an expert, he did perform ‘specialist services’ and was considered an ‘expert on mission’, and consequently fell within the second exception (at ). Finally, the plurality considered the respondent’s contention that he was engaged not as an expert or consultant but as a ‘Project Manager’ and rejected this argument on the basis that the terms of his engagement were determinative, and the label of ‘project manager’ was not inconsistent with his being engaged as an expert (at ).
Gageler J agreed with the orders of the plurality. His Honour similarly emphasised that the meaning of ‘office’ in this matter turns on the statutory context and purpose in which it is used: here, facilitating the performance of Australia’s international obligations relating to the privileges and immunities of officials of international organisations and agencies through the language in the IOPI Act (at ). For Gageler J, the language of the IOPI Act pointed to three categories of office holders to which the privileges and immunities apply: a person holding or performing a high office in the organisation, a person holding an office that is not prescribed as a ‘high office’, and a person serving on a committee or participating in the work of an organisation in various ways (see –). While the first two categories indicate people ‘in’ the organisation, the third extends it to a person participating in the work ‘of’ the organisation but nonetheless not holding an office within it (at ). This distinction between holding an office and performing the duties of an office also indicated that the office is a position existing independently of the person who might hold it from time to time, and that it is a position to which duties attach (at ). In Gageler J’s view, these three features (a position existing in the structure of an international organisation; existing independently of a person who might hold it; and to which duties attach) align the statutory concept of a person who holds an office to the concept under the relevant international conventions on ‘officials’ entitled to privileges and immunities (at ). This approach better captures the relevant features of office that are missed in the test applied by the Tribunal and the FCAFC majority, and make it clear that the respondent, as an individual contractor, cannot be found to be an office holder within the meaning of the UN Regulations (at ), and that, as the plurality demonstrated, he was also an ‘expert’ and thus excluded from the scope of the Commissioner’s ruling (at ).
|High Court Judgment|| HCA 26||9 August 2017|
|High Court Documents||Jayasinghe|
|Full Court Hearing|| HCATrans 62||29 March 2017|
|Special Leave Hearing|| HCATrans 275||16 November 2016|
|Appeal from FCAFC|| FCAFC 79||9 June 2016|
|Decision, AATA|| AATA 456||29 June 2015|