Private ruling: Income tax exemptions
Date of advice: 23 October 2017
Published: March 2018
Ruling period: Year ended: | 30 June 201Y
Date scheme commenced: 1 July 201X

Ruling: Questions and answers | Is an exemption from income tax under section 23AG of the ITAA 1997 available for providing foreign services? | No. | Is an exemption from income tax under section 23AF of the ITAA 1997 available for providing foreign services? | No.

Relevant facts and circumstances: The contract commenced in early 201Y to provide foreign services under a consultant agreement. The contracting company was contracted to provide foreign services as part of an Australian Assistance program. The project is not an approved project for the purpose of section 23AF of the ITAA 1997. The period of service was over 91 days. There was a period where it was necessary to return to Australia due to illness. The contract was for a total of over 91 days. The contract with the Company specifies duties can only be assigned, transferred or subcontracted by seeking written consent from the Company. The contract is for an independent contractor not an employee.

Relevant legislative provisions: Section 23AG of the Income Tax Assessment Act 1936 | Subsection 23AG (6), (6A) of the Income Tax Assessment Act 1936 | Section 23AF of the Income Tax Assessment Act 1936

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. Exemption from income tax for income earned overseas under Section 23AG of the ITAA 1936, does not apply to independent contractors. A tax exemption for income earned overseas as an independent contractor is only allowable under Section 23AF of the ITAA 1936 if the project they are working on is an approved overseas project. | Detailed Reasoning - Exemption for income earned in overseas employment under Section 23AG of the ITAA 1936:: Section 23AG of the ITAA 1936, allows an exemption from paying income tax in Australia for a resident in circumstances where Foreign Earnings is derived from for not less than 91 continuous days in Foreign Service. Subsection 23AG (7) of the ITAA 1936, defines Foreign Earnings as including income consisting of salary and wages and allowances’. Subsection 23AG (7) of the ITAA 1936 also defines Foreign Service as ‘the holder of an office or in the capacity of an employee’. As an independent contractor there is no eligibility for the exemption under section 23AG of the ITAA 1936. | Detailed Reasoning - Exemption of certain income derived in respect of approved overseas projects under Section 23AF of the ITAA 1936:: Section 23AF of the ITAA 1936, allows an exemption from paying income tax in Australia for a resident in circumstances where they have been engaged in qualifying service on a particular approved project for a continuous period of not less than 91 days. In some circumstances a period of absence due to medical treatment can count as service. Subsections 23AF (18) and (11) of the ITAA 1936, clarifies that an approved project must be a project that, the Trade Minister is satisfied is an eligible project and will be, in the national interest and the Minister, has signed approval for the project. In this incidence the Company was contracted to implement Workforce Development as part of the Australian Assistance Program. This is not an approved project for the purpose of Section 23AF of the ITAA 1936. As the project is not an approved project there is no eligibility for the exemption under Section 23AF of the ITAA 1936.

The advice in the Register has been edited and may not contain all the factual details relevant to each decision. Do not use the Register to predict ATO policy or decisions. | Reasons for Decision: These reasons for decision accompany the notice of private ruling.