Private ruling: Assessability of foreign sourced income
Published: March 2012
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013
Date scheme commenced: 1 July 2010

Ruling: Questions and answers: | Are the salary and wages from your deployment to country X on an assistance mission exempt from Australian income tax under section 23AG of the Income Tax Assessment Act 1936? | Yes.


Relevant legislative provisions: 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 | Income Tax Assessment Act 1936 Section 23AG. | Income Tax Assessment Act 1936 Subsection 23AG(1). | Income Tax Assessment Act 1936 Subsection 23AG(1AA). | Income Tax Assessment Act 1936 Subsection 23AG(2).

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 purpose 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 included in assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income that may be exempt. Included in this list is section 23AG of the Income Tax Assessment Act (ITAA 1936), which deals with overseas employment income. Subsection 23AG(1) of the ITAA 1936 provides that where Australian resident individuals are 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. You are an APS employee and are engaged in Foreign Service for a continuous period of not less than 91 days. Therefore your foreign earnings derived from that Foreign Service are exempt from tax in Australia, subject to other provisions listed under section 23AG of the ITAA 1936. Subsection 23AG(1AA) of the ITAA 1936, which took effect from 1 July 2009, provides that those foreign earnings will not be exempt under section 23AG of the ITAA 1936 unless the continuous period of foreign service is directly attributable to any of the following: o delivery of Australian official development assistance by your employer; o activities of your employer in operating a public fund declared by the Treasurer to be a developing country relief fund, or a public fund established and maintained to provide monetary relief to people in a developing foreign country that has experienced a disaster (a public disaster relief fund); o activities of your employer as a prescribed charitable or religious institution exempt from Australian income tax because it is located outside Australia or the institution is pursuing objectives outside Australia; or o deployment outside Australia by an Australian government (or an authority thereof) as a member of a disciplined force. You are an APS employee who has been deployed within a regional development department as a full time officer from the Department of Foreign Affairs and Trade to country X as part of an assistance mission to country X. As your foreign service directly relates to the delivery of Australian official development assistance, 23AG(1AA) of the ITAA 1936 will apply to exempt from tax any income earned as a result of your foreign service. Therefore you satisfy four of the conditions for exemption under section 23AG of the ITAA 1936. Subsection 23AG(2) of the ITAA 1936 provides that no exemption is available under subsection 23AG(1) of the ITAA 1936 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: o a tax treaty or a law of a country that gives effect to such an agreement (paragraphs 23AG(2)(a) and (b) of the ITAA 1936); o 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 (paragraphs 23AG(2)(c) and (d) of the ITAA 1936), or o a law or international agreement dealing with privileges and immunities of diplomats or consuls or of persons connected with international organisations applies (paragraphs 23AG(2)(e), (f) and (g) of the ITAA 1936). You are deployed under the Facilitation of International Assistance Act 2003 . This Act operates to exempt your salary and any allowances from income tax in country X. Therefore, subsection 23AG(2) of the ITAA 1936 will not apply to deny the exemption under subsection 23AG(1) of the ITAA 1936, as your foreign earnings are exempt in country X for a reason other than those listed in subsection 23AG(2) of the ITAA 1936. Accordingly, the salary that you receive that is directly attributable to your foreign service in country X is exempt from income tax in Australia under subsection 23AG of the ITAA 1936.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You are an Australian Public Service (APS) employee. | You were deployed to country X as part of an overseas assistance mission, as a special coordinator. | You are operating under the Government Treaty the Australian Agency for International Development (AusAID). Under this treaty Australia has agreed to send Australian public service employees to provide assistance for country X's medium term development strategy. | Your role as a coordinator is to provide strategic direction, coordination and oversight of assistance activities. Your role requires you to liaise with a number of different levels of government within the country X as well as provide advice relating to the Australian Governments interests. | You are located with Australia's operational base in country X. | You will be engaged in overseas service for a continuous period in excess of 91 days.