Private ruling: Exempt foreign sourced income
Published: June 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: | Is the employment income that you derived while being employed by an international aid organisation in a number of countries exempt from income tax in Australia? | Yes.

Relevant facts and circumstances: You are an Australian resident for income tax purposes. You commenced employment with an international aid organisation that is a non for profit organisation and is engaged in delivering aid to a number of countries around the world. Some of the projects that they are engaged in are sponsored by X. As a consequence of your employment you were required to exercise your employment in a number of countries around the world. You were engaged in foreign employment for more than 91 continuous days in each of the countries that you served. Your employment in country X and country Y was directly attributable to an organisation that is a prescribed charitable or religious institution located or pursuing objectives outside of Australia and is part of a DFAT approved project. Your employment in country Z was directly attributable to an organisation who is a prescribed charitable or religious institution located or pursuing objectives outside of Australia and a prescribed institution which is located outside of Australia and is exempt from income tax in the country it is a resident. Your income was assessable to the authorities of all of the countries that you served.

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

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 were engaged in foreign service, • the foreign service was for a continuous period of at least 91 days, • you derived foreign earnings from that foreign service, • the foreign service is directly attributable to an activities that is listed in subsection 23AG(1AA) of the ITAA 1936, and • the foreign earnings were not exempt from income tax in any of the foreign countries that you served therefore, subsection 23AG(2) of the ITAA 1936 will not apply to make the income that you derived assessable in Australia. Given a consideration of the whole arrangement, it is accepted that you met the above criteria therefore the income that you derived in Countries X, Y and Z is exempt from income tax in Australia under 23AG of the ITAA 1936.