Private ruling: Foreign income
Published: March 2014
Ruling period: Year ending 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014
Date scheme commenced: 1 July 2011

Ruling: Question and answer | Are the salary and allowances you earned while employed overseas exempt from income tax in Australia? | Yes.

Relevant facts and circumstances: You are an Australian resident for income tax purposes. You are deployed to an overseas country. You will be engaged in foreign employment for more than 91 continuous days and earning foreign earnings. You are covered by a convention of the Vienna Convention on Diplomatic Relations (VCDR) and the SOFA. There is not a memorandum of understanding between Australia and the overseas country that exempts the income from taxation in the overseas country. Your income is not taxed in the overseas country. The overseas country normally taxes salary and wage income. There is not a taxation treaty between the Australian Government and the overseas country.

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

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 • 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.