Private ruling: Exempt income
Published: September 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Is your employment income earned on an external Australian territory exempt from tax? | A1: Yes

Relevant facts and circumstances: You commenced employment on an external Australian territory in month 20XX. Your earnings were not taxed while you were employed on the external Australian territory. You returned to Australia permanently in month 20YY. The external Australian territory is a prescribed territory under section 24B of the Income Tax Assessment Act 1936.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 6-15 | Income Tax Assessment Act 1936 Section 24B | Income Tax Assessment Act 1936 Section 24G

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 during the income year. However, if an amount is exempt income, it is not included in the assessable income of a taxpayer (section 6-15 of the ITAA 1997). Section 24G of the Income Tax Assessment Act 1936 (ITAA 1936) provides an exemption from tax in Australia on certain income derived from employment in a prescribed Territory. Section 24B of the ITAA 1936 details the prescribed territories. Paragraph 24G(1)(e) of the ITAA 1936 provides that the exemption will apply where income is derived by a person from employment wholly or mainly performed in a prescribed territory for the requisite period. The Commissioner must be satisfied that at the commencement of that employment the taxpayer intended to remain in the prescribed territory for a continuous period of more than six months. In your case, you were employed in a prescribed territory for a period of more than six months. As you intended to remain in the prescribed territory for a continuous period of more than six months, any ordinary income derived from your employment in the prescribed territory is exempt from income tax in Australia.