Private ruling: Assessability of salary and allowances paid on deployment to the foreign country
Published: June 2012
Ruling period: 1 July 2011 to 30 June 2013.
Date scheme commenced: 1 July 2011.

Ruling: Question and answer: | Are the salary and allowances paid to you while on deployment in the foreign country exempt from income tax in Australia? | Yes.

Relevant facts and circumstances: You are an employee of the Australian Public Service (APS). You have been posted to an Australian government assistance team (AGAT) in a foreign country. You will remain an Australian citizen for taxation purposes while you are posted to AGAT. You will not perform diplomatic or consular duties. Your deployment to AGAT is governed by the Facilitation of the International Assistance Act 2002 (foreign country) governed by the relevant act. Pursuant to the FIA Act, you are a member of the AGAT visiting contingent. While on deployment in the foreign country you will receive salary and allowances on a fortnightly basis:

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

Reasons for decision: Summary: Section 23AG of the Income Tax Assessment Act (ITAA 1936) provides that where an individual who is an Australian resident for taxation purposes is engaged in foreign service for a continuous period of not less than 91 days, foreign earnings derived from that foreign service are exempt from tax in Australia. Foreign service is defined in the ITAA 1936 as service in a foreign country as the holder of an office or in the capacity of an employee. As an employee of DFAT on posting to AGAT you are considered to be engaged in foreign service. Foreign earnings are defined in ITAA 1936 to include salary, wages, bonuses or allowances. Class Ruling CR2005/62 - Income Tax: Assessability of income: Australian Public Service Employees deployed to the foreign country states that the salary, as well as certain allowances paid to APS employees on posting to AGAT, all come within the definition of foreign earnings in the ITAA 1936. Accordingly, the salary, and allowances you are paid fortnightly while on posting to AGAT all constitute foreign earnings. The exemption from taxation in Australia under section 23AG of the ITAA 1936 on foreign earnings earned in foreign service is not available unless certain conditions are met. In particular, the exemption is not available if the provisions of subsection 23AG(2) of the ITAA 1936 apply. Subsection 23AG(2) of the ITAA 1936 specifies that that no exemption is available 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 double tax agreement or a law of a country that gives effect to such an agreement, · 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, or · a law or international agreement dealing with privileges and immunities of diplomats or consuls or of persons connected with international organisations applies. As noted in Class Ruling CR 2005/62: · There is no double taxation agreement between Australia and the foreign country. · The privileges and immunities of persons connected with an international organisation do not apply to the situation in the foreign country. · The foreign earnings derived by APS employees in the foreign are not exempt under any general provision of foreign country tax law. Rather, it is the FAI Act which provides that APS personnel deployed to the foreign country as part of AGAT shall be exempt from taxation by the foreign country government on their pay and other emoluments. Accordingly, CR 2005/62 notes that the foreign earnings of APS employees will be exempt in the foreign country for a reason other than those listed in subsection 23AG(2). Therefore, subsection 23AG(2) does not apply to deny the exemption available under section 23AG. In your case, you meet the conditions required for the exemption to apply to you because: · You will be continually deployed to AGAT for more than 91 days. · Your foreign service relates directly to the delivery of Australian official development assistance by your employer to the foreign country under AGAT. Subsection 23AG(2) of the ITAA 1936 does not apply to your situation | Detailed Reasoning - Conclusion: The salary, as well as the allowances you are paid while on posting to AGAT are exempt from taxation in Australia.

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