Private ruling: Assessability of foreign source income
Date of advice: 9 December 2015
Published: February 2016
Ruling period: 1 July 20XX to 30 June 20YY.
Date scheme commenced: On or after 1 July 20XX.

Ruling: Questions and answers: | Are the wages paid to you during your posting to Country A exempt from taxation in Australia under section 23AG of the Income Tax Assessment Act 1936 ? | Yes.

Relevant facts and circumstances: You are an Australian resident for tax purposes. You are a serving member of the Australian Defence Force. You were posted to Country A for a continuous period exceeding 91 days. You were paid your normal wage during this period. You did not have diplomatic or consular agent status. Country A normally taxes income from employment. There is no double tax agreement between the Government of Australia and Country A, nor is there any agreement between the two countries that exempts your employment income from being assessable in Country A.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 6-15 | Income Tax Assessment Act 1936 Section 23AG

Reasons for decision: Summary: Generally, the assessable income of an Australian resident taxpayer includes all the ordinary income they earn from all sources, in or out of Australia in an income year, unless the income is made exempt from taxation in Australia by a specific provision of the tax law. Income in the form of salary, wages and allowances are all types of ordinary income. Section 23AG of the Income Tax Assessment Act 1936 (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 deployment outside of Australia as a member of a disciplined force by the Commonwealth). • Subsection 23AG(2) of the ITAA 1936, the provisions of which make certain foreign earnings not exempt under section 23AG of the ITAA 1936, must not apply to your circumstances. Based on the facts you have provided, you meet the criteria for the exemption under section 23AG of the ITAA 1936. Accordingly, the wages paid to you during your posting to Country A are exempt from taxation in Australia.