Private ruling: Exempt income under 23AG of the Income Tax Assessment Act 1936
Date of advice: 17 February 2016
Published: April 2016
Ruling period: 1 July 2015 to 30 June 2016.
Date scheme commenced: 1 July 2015.

Ruling: Question and answer: | Is the income from your overseas employment exempt from taxation in Australia? | Yes.

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You are employed in Country A by Entity A. You are an employee of Entity A. You have a contract of employment with Entity A. You have not taken any leave during your employment with Entity A. Entity A receives funding from Australia's official development assistance (ODA) program. You are responsible for implementing a program that is funded solely by Australian ODA. You have supplied a letter from your employer's human resources department attesting to the fact that your position is funded by Australian ODA allocated for activities under the General Agreement on Development Co-operation between the Government of Australia and the Government of the Country A . The income from your employment with Entity A is exempt from taxation in Country A under Article 11 of the General Agreement on Development Co-operation between the Government of Australia and the Government of the Country A . None of the exclusions for the exemption from income tax provided by section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936) apply to you.

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

Reasons for decision: Detailed Reasoning - Assessable income - general: As a general rule, and under the provisions of section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), the assessable income of an Australian resident taxpayer includes all the ordinary income they earn from all sources, in or out of Australia in an income year. Income in the form of salary, wages and allowances are all types of ordinary income. Although a payment may be considered ordinary income and will generally be assessable under the provisions of section 6-5 of the ITAA 1997, there are some instances where ordinary income may be excluded from an individual's assessable income in Australia. This will be the case for example if a specific provision of the tax law makes the income exempt from taxation in Australia. Exemption from taxation under section 23AG of the Income Tax Assessment Act 1936 Subsection 23AG(1) of the ITAA 1936 provides that foreign earnings are exempt from income tax in Australia 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. • From 1 July 2009 onwards, the foreign service is directly attributable to an activity that is listed in subsection 23AG(1AA) of the ITAA 1936 (the listed activities include the delivery of Australian ODA by your employer). • The foreign earnings must not be covered by subsection 23AG(2) of the ITAA 1936, the provisions of which make certain foreign earnings not exempt under section 23AG of the ITAA 1936. Based on the facts you have provided, it is accepted that you meet the criteria for the exemption under section 23AG of the ITAA 1936 to apply to the income from your employment with Entity A.