Private ruling: Foreign sourced income
Published: July 2012
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012
Date scheme commenced: On or after 1 January 2011

Ruling: Question and answer: | Is the income that was derived from the provision of logistical and support services through a contractor to an Australian Government Authority for the provision of support services to a regional assistance authority exempt from Australian income tax under section 23AG of the Income Tax Assessment Act 1936? | No.



Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Salary and wages are ordinary income for the purpose of subsection 6-5(2) of the 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 Income Tax Assessment Act (ITAA 1936), which deals with overseas employment income. Subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that where a resident taxpayer is engaged in foreign service for a continuous period of not less than 91 days, any foreign earnings derived from foreign service will be exempt from tax in Australia. 'Foreign service' includes service in a foreign country in the capacity of an employee and 'foreign earnings' includes income consisting of salary, wages, bonuses and allowances. In your case, you were contracted to provided logistical and support services through a contractor, to an Australian Government Authority. Your length of service in country X was less than 91 days. As this period of service in country was for a continuous period of less than 91 days, you do not satisfy the conditions that will exempt any income derived from this service from being assessable in Australia, under section 23AG of the ITAA 1936. Accordingly, the income earned from your services in country X are assessable in Australia, under subsection 6-5(2) of the ITAA 1997.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You are an Australian resident for income tax purposes. | You are a consultant, trading as a sole trader under the trading name. | Your trading name entity has entered into an agreement as a subcontractor to a contractor who is contracted by an Australian Government Authority for the provision of support services for a regional assistance authority. | The agreement requires you to undertake the provision of services in country X. | Your length of service in country was less than 91 days. | You have provided a copy of the sub-contract agreement which forms part of this private binding ruling.