Private ruling: Foreign income
Published: December 2014
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015

Ruling: Q1: Are the salary and allowances you earned while posted overseas for full-time study exempt from income tax in Australia? | A1: Yes

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are a resident of Australia for tax purposes. You are serving in the defence forces. You were posted overseas. For the duration of the posting you were not required to do any other duties. You will receive your normal base salary. You will also be paid an overseas living allowance, hardship allowance, and uniform allowance.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 23AG. | Income Tax Assessment Act 1997 Section 6-5 | International Agreements Act

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. A person is 'deployed' within the meaning of paragraph 23AG(1AA)(d) of the ITAA 1936 if they have been directed to perform duties overseas by the Commonwealth, a State or a Territory or an authority thereof in their capacity as a member of a disciplined force. This includes the member being sent overseas to undertake or participate in study or training activities in their capacity as a member of the relevant disciplined force. 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. Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Salary and wages are ordinary income for the purpose of subsection 6-5(2) of the ITAA 1997.