Private ruling: Foreign Income - 23AF
Published: October 2013
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: 1 July 2012

Ruling: Q1: Is the foreign income you derive in respect of an approved overseas project while its approval is in force, exempt from tax pursuant to section 23AF of the Income Tax Assessment Act 1936 ? | A1: Yes

Relevant facts and circumstances: You are a resident of Australia for income tax purposes. You are contracted by a company to provide services overseas. The project you are involved in is called X. You advised that the project was approved according to the criteria set by the Minister of Trade You are responsible for any income tax payable in Country X.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 23AF, | 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

Reasons for decision: Summary: 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 purposes of subsection 6-5(2) of the ITAA 1997. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 23AF of the Income Tax Assessment Act 1936 (ITAA 1936) which deals with income derived in respect of overseas approved projects. Section 23AF of the Income Tax Assessment Act 1936 (ITAA 1936) provides that where an Australian resident has been engaged on a qualifying service on a particular approved project for a continuous period of not less than 91 days, any eligible foreign remuneration derived by the person that is attributable to the qualifying service is exempt from tax. Qualifying service includes time spent outside Australia working on the project, reasonable travel time between Australia and the project, absences due to accident or illness while engaged on qualifying service, and time spent on leave which accrued during the qualifying service (subsection 23AF(3) of the ITAA 1936). All income directly attributable to qualifying service by the taxpayer on an approved project (for example, salary, wages, commission, bonuses, allowances, contractual payments and payments for recreation leave entitlements which accrue during the relevant period) is eligible for the exemption (subsection 23AF(18) of the ITAA 1936). However, section 23AF of the ITAA 1936 does not exempt excluded income. Subsection 23AF(17) of the ITAA 1936 provides income is excluded income if the income is exempt under section 23AG of the ITAA 1936 and exempt from tax in the overseas country. As you are an Australian resident who provides service on an approved project overseas for a continuous period of not less than 91 days, and you are responsible for any income tax payable in the country, you satisfy the conditions under section 23AF of the ITAA 1936. Accordingly, the income you derive overseas is exempt from income tax in Australia under section 23AF of the ITAA 1936.