Private ruling: Exempt foreign employment income
Date of advice: 1 July 2021
Published: September 2021
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are the foreign earnings you derived from your employment in Country X exempt from tax in Australia under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: Yes. You met the exemption conditions in subsection 23AG(1) of the ITAA 1936 as you derived foreign earnings during a continuous period of foreign service of not less than 91 days, which was directly attributable to the delivery of Australian official development assistance by your employer. Further, subsection 23AG(2) of the ITAA 1936 does not prevent the exemption as your employment income is exempt from income tax in Country X under the Subsidiary Arrangement between Australia and Country X relating to the Program, which is a reason outside those listed in subsection 23AG(2).

Relevant facts and circumstances: You are an Australian resident for tax purposes. You entered into an employment contract to carry out work in relation to a Program in Country X. The Program is funded by the Australian goverment and co-ordinated by the Department of Foreign Affairs and Trade (DFAT). The Program constitutes Australian official development assistance. You worked in Country X on the Program for a period of greater than 91 days. Empoyment income is subject to taxation in Country X. There is a double tax agreement in force between Australia and Country X (the agreement). The agreement provides that salaries, wages, and similar remuneration derived by an individual who is a resident of Australia in respect of an employment can be taxed in Country X in circumstances which include where the employment is exercised in Country X for a period or periods exceeding 91 days in a year of income. There is a Treaty (the Treaty) in force between Australia and Country X which sets out arrangements relating to development co-operation between Australia and Country X. A clause of the Treaty provides for an exemption from tax in Country X on salaries and allowances derived by Australian government funded personnel from activities to which the Treaty applies. Another clause of the Treaty provides that in relation to activities under the Treaty, Australia and Country X may enter into specific subsidiary arrangements for their implementation. A clause of the Subsidiary Arrangement between Australia and Country X relating to the Program(the Subsidiary Arrangement)provides that the terms of the Treaty apply to the Subsidiary Arrangement. Another clause of the Subsidiary Arrangement provides that the Government of Country X will facilitate the deployment of Australian government funded personnel required for the purposes of the Program by granting exemption from tax on salaries and allowances. You are not liable for tax in Country X because of the relevant clause of the Subsidiary Arrangement. You have provided a letter from your employer which states that your foreign service is directly attributable to the delivery of Australian official development assistance and your service is covered by the Subsidiary Arrangement between Australia and Country X.

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)


This ruling applies for the following period period :