Private ruling: Assessable income
Date of advice: 25 May 2026
Published: 10 August 2026
Ruling period: Year ending 30 June 20YY | Year ending 30 June 20YY | Year ending 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Is your foreign employment income (including allowances) whilst posted in Country Z exempt from taxation in Australia under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: Yes.

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You are a member of an Australian organisation. You are serving with the Australian organisation in a posting to Country Z for a period of time. You are appointed in a position in Country Z. The appointment is undertaken as part of Australia's formal cooperation arrangements with the Government of Country Z. The presence of personnel in Country Z, including this position, is conducted pursuant to bilateral cooperation frameworks between Australia and Country Z. Your duties are directed by the Australian Government and form part of Australia's official international engagement program. Your service in Country Z forms part of the deployment of personnel overseas to undertake cooperative activities. This appointment is not a discretionary or private arrangement. It is an official and directly attributable to Australia's government-directed cooperation program with Country Z. You receive base salary and wages. In addition to your base salary, you receive a number of allowances directly attributable to your foreign service in Country Z. All of the above payments, including salary and allowances, are paid through an Australian payroll system. You do not pay tax on your income in Country Z.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 23AG

Reasons for decision: Summary: Subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that foreign earnings are exempt from income tax in Australia where all 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. • The foreign service is directly attributable to an activity that is listed in subsection 23AG(1AA) of the ITAA 1936. From the information provided, during your posting to Country Z you will satisfy all of the above criteria. Subsection 23AG(2) of the ITAA 1936 prevents the exemption under subsection 23AG(1) of the ITAA 1936 where the income is exempt from income tax in the foreign country only because of one or more of the following reasons: • a double tax agreement or a law of a country that gives effect to such an agreement (paragraphs 23AG(2)(a) and (b)); • the foreign country exempts from income tax, or does not provide for the imposition of income tax on, income derived in the capacity of an employee, income from personal services or similar income (paragraphs 23AG(2)(c) and (d)); or • a law or international agreement dealing with diplomatic or consular privileges and immunities, or privileges and immunities of persons connected international organisations (paragraphs 23AG(2)(e), (f) and (g)). Your income will not be exempt from income tax in Country Z only because of one or more of the above reasons. Therefore, subsection 23AG(2) of the ITAA 1936 will not apply to deny an exemption under subsection 23AG(1) of the ITAA 1936. Accordingly, your foreign employment income (including allowances) whilst posted to Country Z is exempt from taxation in Australia under section 23AG of the ITAA 1936.