Private ruling: Foreign Income
Published: July 2011
Ruling period: Year ending 30 June 2011. | Year ending 30 June 2012. | Year ending 30 June 2013. | Year ending 30 June 2014.
Date scheme commenced: 1 July 2010.

Ruling: Q1: Will the employment income you derive from employment in Country A be exempt income in Australia under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 6-5(2) | Income Tax Assessment Act 1997 subsection 6-15(2) | Income Tax Assessment Act 1997 section 11-15 | Income Tax Assessment Act 1936 subsection 23AG(1) | Income Tax Assessment Act 1936 subsection 23AG(1AA)

Reasons for decision: Summary: Salary and allowances are ordinary income for the purposes of subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997). Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not included in assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income that may be exempt. Included in this list is section 23AG of the ITAA 1936, which deals with overseas employment income. Subsection 23AG(1) of the ITAA 1936 provides that where Australian resident individuals are engaged in foreign service for a continuous period of not less than 91 days, foreign earnings derived from that foreign service are exempt from tax in Australia. However, new subsection 23AG(1AA) of the ITAA 1936, which took effect from 1 July 2009, provides that those foreign earnings will not be exempt under section 23AG of the ITAA 1936 unless the continuous period of foreign service is directly attributable to the following: · delivery of Australian official development assistance by your employer. · activities of your employer in operating a public fund declared by the Treasurer to be a developing country relief fund, or a public fund established and maintained to provide monetary relief to people in a developing foreign country that has experienced a disaster (a public disaster relief fund). · activities of your employer as a prescribed charitable or religious institution exempt from Australian income tax because it is located outside Australia or the institution is pursuing objectives outside Australia. · deployment outside Australia by an Australian government (or an authority thereof) as a member of a disciplined force. In your case, you are employed by a specific Australian government agency and you have been deployed to work in Country A. For the duration of your deployment in Country A, you are subject to the command and controls of a specific Australian government agency. Therefore, your foreign service is considered to be directly attributable to the last condition mentioned above in subsection 23AG(1AA) of the ITAA 1936. Accordingly, you are considered to be deployed outside Australia by an Australian government as a member of a disciplined force. Australia does not have a Tax Treaty in place with Country A and your income is not exempt from tax in Country A. As you will work continuously overseas for a period greater than 91days, your foreign salary and allowances will be exempt income in Australia under section 23AG of the ITAA 1936.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Relevant facts: You are an Australian resident for income tax purposes. | You are a civilian employee of the Australian government department. | You are deployed on a specific program in Country A. The program is considered to be official Australia Government overseas development assistance. | Your deployment is from some time in the 2010-11 income year to some time in the 2012-13 income year, but maybe extended to some time in the 2013-14 income year. | The program is an official overseas engagement program managed by an Australian Government agency and is designed to build the skills and capacity of Country A's Defence Force and civilian Ministry of Defence. | For the duration of your deployment in Country A, you are subject to a Australian government agency command and control. | During your employment, you only intend to take annual leave that has accrued as a result of your foreign service in Country A. You do not intend to return to Australia to work during these periods of annual leave. | You only derive salary and wages for the employment you undertake in Country A. | Country A has a tax system that taxes employment income. | Australia does not have a tax treaty with Country A.