Private ruling: Assessability of foreign employment income
Date of advice: 13 June 2019
Published: August 2019
Ruling period: Year ending 30 June 2020
Date scheme commenced: 1 July 2019

Ruling: Q1: Will the salary and allowances you derive from your foreign employment be exempt from income in Australia under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: Yes. You will be engaged in foreign service as a member of a disciplined force for a continuous period of at least 91 days thereby meeting the requirements of subsection 23AG(1) of the ITAA 1936, and subsection 23AG(2) of the ITAA 1936 will not operate to deny the exemption as your foreign earnings will not be exempt from income tax in the foreign country only because of one of the reasons listed in that subsection. | Q2: Will the salary you derive from recreation leave that accrued during your period of foreign service be exempt from income tax in Australia under section 23AG of the ITAA 1936 when you take the leave after the completion of your foreign service? | A2: Yes. The salary paid for the period of leave will be exempt because, as the leave will have accrued during a period of foreign service, the earnings will be attributable to the period of foreign service and hence will be foreign earnings derived from that foreign service.

Relevant facts and circumstances: You are an Australian resident for tax purposes. You will be posted to a foreign country by your employer. You will be deployed as a member of a disciplined force by the Commonwealth. You will be in the foreign country for a continuous period of not less than 91 days. There is currently no double tax agreement between Australia and the foreign country. Salary and wages income is subject to taxation in to the foreign country. You will not have to pay income tax on your employment income in the foreign country. Whilst posted to the foreign country you will not be a member of a diplomatic mission covered by the Vienna Convention or any similar agreement. Whilst posted to the foreign country you will be paid a salary, a service allowance, a cost of posting allowance, a hardship allowance, a separation allowance and a language allowance. You will take recreation leave accrued during your foreign posting after you complete your deployment to the foreign country.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 23AG | Income Tax Assessment Act 1936 Subsection 23AG(1) | Income Tax Assessment Act 1936 Subsection 23AG(2)