In August 2020 I reported that a taxpayer: Stuart Hamilton, was appealing the decision of the AAT, that he was not exempt from tax under the International Organisations (Privileges and Immunities) Act 1963 [IOPIA], on the basis of the 2017 High Court case of CofT v Jayasinghe [2017] HCA 26) (see related TT article). You would be forgiven for thinking (as I was) that this appeal was pretty esoteric and probably arid – especially having published on the Jayasinghe case. You can imagine my surprise, earlier this month, when Mr Hamilton emailed me, with a link to my 2020 article and a copy of the Federal Court Order allowing his appeal. I congratulated him and asked if he’d like to give me a summary of the case, which he did and I’ve reproduced below. The gist of it is that they had to change the relevant regulations, to restore their original intent, and they did so, retrospectively, which then allowed the Court to allow his appeal (I think unopposed). I deduced, as you might, that Mr Hamilton seems well versed in this esoteric niche, should you ever need assistance in this area. His summary follows.
On 8 April 2022 Justice Wigney of the Federal Court allowed the appeal of the taxpayer from Hamilton and Commissioner of Taxation [2020] AATA 1812.
The case, listed as ’Strategic Litigation’ by the ATO, concerned the taxability of salaries of short term contractual employees of the IMF and World Bank. The 2020 AAT case had confirmed the Commissioners view, flowing from the High Court decision in Jayasinghe (Commissioner of Taxation v Jayasinghe [2017] HCA 26), that such short term employees did not ‘hold office’ in these International Organisations and were thus not entitled to the privileges and immunities set out in the International Organisations (Privileges and Immunities) Act 1963 [IOPIA].
The Commissioners view was at odds with that of the International Organisations, who pay such employees at net of tax rates, and those of DFAT – the administrators of the IOPIA. The AAT asked the Commissioner’s Counsel directly whether DFAT should be given the opportunity to make a submission on the matter as the AAT were potentially about to ‘gut their statute’. The Commissioner’s Counsel replied: ‘With respect, no.’ Such tax technical echo chambers inside the ATO might not have been the best way to develop a whole of Government understanding of the policy intent behind the laws as the Commissioner’s view was also at odds with the views of the Government back when the Specialized Agencies (Privileges and Immunities) Regulations (1986) were introduced to domestically give ‘full effect’ to Australia’s international obligations set out in the 1947 Convention on the Privileges and Immunities of the Specialized Agencies. Apparently in the Commissioner’s view, full effect after Jayasinghe, was not as full as one might have previously believed.
The 2020 AAT decision turned out to be a Pyrrhic victory for the ATO as the Treasurer, now aware of the matter and its policy implications, quickly announced that amending regulations would be introduced that, in keeping with Australia’s international obligations, would ensure that the salaries and emoluments of short term contractual employees were exempt from taxation in Australia. These amending regulations, the Specialized Agencies (Privileges and Immunities) Amendment Regulations 2022, were approved by the Governor General on 31 March 2022 and apply retrospectively to salaries and emoluments paid by the IMF or World Bank to persons, including consultants, on short term missions on or after 1 July 2017. In hindsight, the Commissioner’s Jayasinghe fixation, on officials ‘holding office’, could have done with a touch more Teoh (Teoh [1995] HCA 20) and considered what was actually trying to be achieved. It really would have saved everyone a great deal of time and money. That would be ‘strategic’.
Court Order allowing appeal
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[Tax Month – May 2022 – Previous Month, 13.5.22]