Private ruling: Foreign employment income - Country X
Published: October 2011
Ruling period: Year ending 30 June 2011 | Year ending 30 June 2012
Date scheme commenced: 1 July 2010

Ruling: Q1: Is the salary you receive from employment in Country X eligible for income tax exemption as a "prescribed institution located outside Australia which is exempted from tax in its country" in accordance with section 50-50 of the Income Tax Assessment Act 1997 (ITAA 1997) as per subsection 23AG(1AA)(c) of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: No.

Relevant facts and circumstances: You are an Australian resident for taxation purposes. You are engaged in continuous foreign services in Country X as an employee of University for more than 91 days. Your employment commence on 1 July 2010 to approximately 30 June 2012. Your University is an independent international non-profit organisation governed by a special charter enacted by Government of Country X. University is not liable to pay any tax to the Government of Country X. Its faculty members, other reaching, research or library staff members, administrators, officers, experts and technicians employed by the University including without limitations, visiting faculty and other visiting personnel, who are not nationals of Country X and are working in Country X for the objectives of University may be exempt from payment of income tax in Country X.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 23AG(1AA)(c) | Income Tax Assessment Act 1997 Subsection 50-50(c) | Income Tax Assessment Act 1997 Subsection 50-50(d) | Income Tax Assessment Regulations 1997 Section 50-50.01 | Income Tax Assessment Regulations 1997 Section 50-50.02

Reasons for decision: Summary: In order for foreign income to be exempt from tax in Australia as per subsection 23AG(1AA)(c) of the Income Tax Assessment Act 1936 (ITAA 1936), the activities of the taxpayer's employer must meet the requirements under section 50-50(c) or section 50-50(d) of the Income Tax Assessment Act 1997 (ITAA 1997). The EM provides further guidance on determining whether an employer is an exempt institution for income tax purposes. 1.28 A person's foreign earnings will be eligible for exemption if the foreign service is directly attributable to their employer's activities as an institution covered by paragraph (c) or (d) of section 50-50 of the ITAA 1997. [ Schedule 1, item 1, paragraph 23AG(1AA)(c )] 1.29 These paragraphs apply to a prescribed charitable or religious institution that is exempt from Australian income tax pursuant to item 1.1 or 1.2 of section 50-5 of the ITAA 1997. Such organisations are either located outside Australia or have a physical presence in Australia but incur their expenditure and pursue their objectives principally outside Australia. In your case, your employer s not contained within any of the lists contained within 50-50.02 of the ITAR 1997. Given this, employer does not fall within the requirements of paragraph (d) of section 50-50 of the ITAA 1997. | Detailed Reasoning - In your case:: As your employer does not satisfy any of the requirements contained within section 50-50 of the ITAA 1997, your foreign employment income would not be exempt from tax in Australia under paragraph (c) of section 23AG(1AA) of the ITAA 1936.

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