Private ruling: Exempt foreign employment income
Published: March 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Question and answer | Is the income you earned while deployed in Country X exempt from income tax in Australia? | Yes.

Relevant facts and circumstances: You are a resident of Australia for tax purposes. You are a member of the Australian Government. You were deployed to Country X for a continuous period of more than 91 days. Australia has a tax treaty with Country X. Country X taxes employment income under its domestic law. The income you earn while posted in Country X is exempt from tax in Country X because of the terms of General Agreement on Development Cooperation entered into between Australia and Country X.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 23AG.

Reasons for decision: Summary: According to section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936), your foreign employment income may be exempt from tax if you satisfy all of the following conditions: • you are an Australian resident • you are engaged in continuous foreign service as an employee for 91 days or more • your foreign earnings are from employment in one of five categories of foreign service as set out in subsection 23AG(1AA) of the ITAA 1936, and • your foreign employment income will not be exempt if a non-exemption condition as set out in subsection 23AG(2) of the ITAA 1936 applies. In your case, you are a resident of Australia for tax purposes. You were deployed overseas as a member of an Australian department, which falls into one of the five categories of foreign service listed in section 23AG of the ITAA 1936. You engaged in foreign service for a continuous period greater than 91 days. The income you earn while posted in Country X is exempt from tax in Country X because of the terms of General Agreement on Development Cooperation entered into between Australia and Country X. The exemption provided by the General Agreement on Development Cooperation does not fall under any of the other exemption categories under subsection 23AG(2) of the ITAA 1936. Therefore, you have met all the requirements of section 23AG of the ITAA 1936 and your foreign employment income is exempt from tax in Australia.