Private ruling: Foreign income
Date of advice: 25 June 2015
Published: June 2015
Ruling period: Period ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Are the salary and allowances you received from employment in Country A exempt from income tax in Australia under section 23AG of the Income Assessment Act 1936 (ITAA 1936) ? | Yes.

Relevant facts and circumstances: You are an Australian resident for tax purposes. You were employed by the Australian Government, for the duration of the 201X financial year. You were on an overseas posting in Country A during the 201X financial year. During the 201X financial year you spent eight of every twelve weeks working in Country A and four of every twelve weeks leave out of Country A. The leave was accrued during your period of foreign service, and was taken in accordance with the terms and conditions of that service. Your foreign service was directly attributable to the delivery of Australian official development assistance by your employer. You were engaged in foreign employment for more than 91 continuous days. There is an agreement between Australia and Country A that exempts the income from taxation in the overseas country. There is no taxation treaty between the Australian Government and Country A.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 23AG | Income Tax Assessment Act 1936 Section 23AG(1) | Income Tax Assessment Act 1936 Section 23AG(1AA) | Income Tax Assessment Act 1936 Section 23AG(2)

Reasons for decision: Summary: Subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that foreign earnings are exempt from income tax where all of the following requirements are satisfied: • you are a resident of Australia and a natural person, • you are engaged in foreign service, • the foreign service is for a continuous period of at least 91 days, • you derive foreign earnings from that foreign service, • the foreign service is directly attributable to an activity that is listed in subsection 23AG(1AA) of the ITAA 1936, and • the foreign earnings are not exempt from income tax in the foreign country only because of one of the reasons listed in subsection 23AG(2) of the ITAA 1936. Given a consideration of the whole arrangement, it is accepted that you meet the above criteria and the income referable to your foreign service is exempt from income tax in Australia. | Detailed Reasoning - Additional Information: If any of your foreign employment income is exempt from tax, the total that is exempt from tax less any expenses that are not capital in nature that you incurred in earning that exempt income should be included at N item 20 of your tax return. If the amount was a loss, write 0 . You cannot claim a foreign income tax offset on this income.