Private ruling: 23AG exemption
Date of advice: 17 January 2019
Published: May 2019
Ruling period: Period ending 30 June 2018
Date scheme commenced: 6 June 2017

Ruling: Q1: Is your income derived from your deployment in the country x exempt from income tax in Australia under section 23AG of the Income Tax Assessment Act 1936 ? | A1: No

Relevant facts and circumstances: You are an Australian resident for income tax purposes. You are employed with an employer. You were deployed to the country X under a development programme. You were deployed on a particular model You signed a document prior to your deployment that was a formal directive from your employer. You signed a document Section 23AG tax exemption – agreement on process and withholding prior to you leaving. You were planning to remain in country X for more than 91 days. You would then return to Australia for a period, go on leave, then deploy back to mission. Your employer deemed you unfit to remain in the location and your medical clearance was withdrawn. Your employer returned you to Australia after less than 91 days. You continued to work remotely for the mission under the same employer and your work tasks were unchanged. You were approved to stay employed against the Determination of overseas conditions for a period and later on Australian conditions. You returned to work after leave and redeployed to country X. You were advised by your employer that as you did not spend 91 days in country X you were not eligible for an exemption from tax under 23AG. You have been asked to pay back the tax exemption that was applied to you. There is no Double Tax Agreement between country X and Australia.

Relevant legislative provisions: 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 Paragraph 23AG (1AA)(d) | Income Tax Assessment Act 1936 Subsection 23AG (2) | Income Tax Assessment Act 1936 Paragraph 23AG (2) (b)

Reasons for decision: Summary: Section 23AG of the ITAA 1936 provides that foreign earnings are exempt from income tax in Australia 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. ● From 1 July 2009 onwards, the Foreign Service is directly attributable to an activity that is listed in subsection 23AG (1AA) of the ITAA 1936 (the listed activities include the person’s deployment outside of Australia as a member of a disciplined force by the Commonwealth). ● Subsection 23AG (2) of the ITAA 1936, must not apply to the taxpayer. When you accepted the position under the terms that your employer has a right to revoke or suspend your assignment for any reason and direct you to return to Australia. You were also made aware and accepted that: ● Failure to spend a continuous 91 days in foreign service will result in the exemption not applying and all foreign income being subject to taxation in Australia; and ● Members must be aware that if they fail to meet the exemption requirements the employer will treat the income as subject to Australian tax. You have not met the requirement of meeting the continuous service of 91 days. Your employer recognised this fact and informed you, that as you did not complete 91 days in Foreign Service you were not eligible for the tax exemption. | Detailed Reasoning - Conclusion: Accordingly, as you do not satisfy all the exemption conditions provided for under section 23AG of the ITAA 1936, the income that you derived from your overseas deployment to country X is not subject to a tax exemption.