Private ruling: Foreign employment income - Australian defence force
Date of advice: 15 November 2018
Published: March 2019
Ruling period: For the year ended 30 June 2017 | For the year ended 30 June 2018 | For the year ended 30 June 2019
Date scheme commenced: January 2017

Ruling: Q1: Is your foreign employment income exempt from taxation in Australia under Section 23AG of the Income Assessment Act 1936 (ITAA 1936)? | A1: Yes Subsection 23AG(1) of the 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 and thus, not assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997).

Relevant facts and circumstances: You are a member of the Australian Defence Force (ADF) on deployment to Country X delivering a relevant Program. You have been posted in Country X for two years. You provided that your liability for taxation is dealt with in: ● the Agreement Between Australia and Country X Regarding the Status of Forces of Each State in the Territory of the other State (1977) No. 6 (Australian Treaty 1977 No. 6), and ● the Defence Cooperation Arrangement between the Government of Australia and the Government of Country X . You provided a copy of a letter written by the Department of Defence Australia the Acting Secretary of Country X Department of Defence regarding the income tax treatment of Australian Department of Defence (ADOD) military and civilian personnel supporting the delivery of Australian relevant program activities in Country X. The Acting Secretary of Country X Department of Defence responded to the Secretary of the Department of Defence Australia. Written correspondence confirms that the staff position that you are in supports the delivery of the relevant program. You spend 100% of your time in the position supporting the delivery of the relevant program.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 23AG | Income Tax Assessment Act 1936 subsection 23AG(1) | Income Tax Assessment Act 1936 subsection 23AG(1AA) | Income Tax Assessment Act 1936 paragraph 23AG(1AA)(d) | Income Tax Assessment Act 1936 subsection 23AG(2) | Income Tax Assessment Act 1936 paragraph 23AG(2)(b) | Income Tax Assessment Act 1936 subsection 23AG(6) | Income Tax Assessment Act 1936 subsection 23AG(7) | Income Tax Assessment Act 1997 subsection 6-5(2) | Income Tax Assessment Act 1997 subsection 6-15(2) | Income Tax Assessment Act 1997 section 11-15 | International Tax Agreements Act 1953 section 4 | International Tax Agreements Act 1953 Schedule 29 Article 19 and | Taxation Administration Act 1953 Division 12