Private ruling: Assessability of foreign income
Published: October 2014
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: 1 July 2012

Ruling: Question and answer | Is the foreign employment income you derived from working overseas exempt income in Australia under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936)? | No.

Relevant facts and circumstances: You are an Australian resident for income tax purposes. You were employed by the Australian branch of a charitable organisation to carry out work overseas. You carried out the work for more than 91 days. The organisation is a prescribed charitable institution. There is no MOU between Australia and the overseas country. You have stated that you did not pay tax in the overseas country because you were not a native of that country. However, you have been unable to identify why this is the case.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 23AG

Reasons for decision: Summary: Subsection 23AG (1AA) of the ITAA 1936 provides that foreign earnings are not exempt from tax unless the continuous period of Foreign Service is directly attributable to any of the following: • Delivery of Australian official development assistance by your employer. • Activities of your employer in operating a public fund declared by the Treasurer to be a developing country relief fund, or a public fund established and maintained to provide monetary relief to people in a developing foreign country that has experienced a disaster (a public disaster relief fund). • Activities of your employer as a prescribed charitable or religious institution exempt from Australian income tax because it is located outside Australia or the institution is pursuing objectives outside Australia. • Deployment outside Australia by an Australian government (or an authority thereof) as a member of a disciplined force. You were employed by the Australian branch of the organisation for more than 91 days overseas. The organisation is a prescribed charitable institution. You satisfy one of the conditions for exemption under subsection 23AG(1AA) of the ITAA 1936. Subsection 23AG(2) of the ITAA 1936 provides that no exemption is available under subsection 23AG(1) of the ITAA 1936 in circumstances where an amount of foreign earnings derived from service in a foreign country is exempt from tax in the foreign country solely because of: • a tax treaty or a law of a country that gives effect to such an agreement (paragraphs 23AG(2)(a) and (b) of the ITAA 1936) • the law of a foreign country generally exempts from, or does not provide for the imposition of income tax on income derived in the capacity of an employee, income from personal services or any other similar income (paragraphs 23AG(2)(c) and (d) of the ITAA 1936), or • a law or international agreement dealing with privileges and immunities of diplomats or consuls or of persons connected with international organisations applies (paragraphs 23AG(2)(e), (f) and (g) of the ITAA 1936). In order for your employment income to be exempt from tax in Australia under section 23AG of the ITAA 1936, the income must not be exempt from tax in the overseas country only because of one of the reasons listed in subsection 23AG(2) of the ITAA 1936. In your case, you have been unable to specifically identify if and why your employment income was exempt from tax in the overseas country. Therefore, we are unable to determine whether or not you have met the conditions set out in subsection 23AG(2) of the ITAA 1936. Accordingly, the salary you receive during your employment overseas is not exempt from income tax in Australia under subsection 23AG(1) of the ITAA 1936.