Private ruling: Foreign income
Published: January 2014
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: 1 July 2009

Ruling: Q1: Is the salary you earned while employed overseas exempt from tax in Australia? | A1: Yes

Relevant facts and circumstances: You are a resident of Australia for tax purposes. You were posted overseas to work for an aid organisation. You were engaged in foreign employment for more than 91 continuous days. You were employed by the organisation for an Australian aid program. There is an agreement between Australia and the overseas countries to which you were posted that exempts the income from taxation in those countries.

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 | 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. | Subsection 23AG(1AA) of the ITAA 1936, which took effect from 1 July 2009, provides that those foreign earnings will not be exempt under section 23AG of the ITAA 1936 unless the continuous period of foreign service is directly attributable to 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, or | · deployment outside Australia by the Australian government (or an authority thereof) as a member of a disciplined force. | Further, subsection 23AG(2) of the ITAA 1936 provides that the exemption in subsection 23AG(1) of the ITAA 1936 will not apply where the income is exempt from income tax in the foreign country only because of any of the reasons listed in that subsection. | In your case, you have been employed in foreign service (and derived income from that service) in relation to an Australian aid program (the delivery of Australian official assistance by an aid organisation) in overseas countries for a continuous period of more than 91 days. You are a resident of Australia for tax purposes. | There is an agreement (a Memorandum of Understanding) between Australia and the overseas countries that exempts your income from taxation in those countries. This reason is not listed in subsection 23AG(2) of the ITAA 1936. Therefore, the salary you derived whilst on foreign service in the overseas countries is not excluded from section 23AG because of the provisions of subsection 23AG(2) of the ITAA 1936. | Accordingly, the income is exempt from tax in Australia under section 23AG of the ITAA 1936.