Private ruling: Application of 23AG
Published: February 2014
Ruling period: Year ending 30 June 2014
Date scheme commenced: The scheme has commenced.

Ruling: Question and answer: | Are the salary and allowances you earned while employed overseas exempt from income tax in Australia? | Yes

Relevant facts and circumstances: You are an Australian resident for income tax purposes. You are employed by an Australian Government Department. You are being deployed to work in an overseas country for a continuous period that is greater than 91 days. The overseas country normally taxes salary and wage income, however there is a double tax agreement between Australia and the overseas country that you will be deployed in that exempts the imposition of income tax in the overseas country. There is also an agreement between Australia and the overseas country that exempts the imposition if income tax in the overseas country.

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

Reasons for decision: Summary: Subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that foreign earnings are exempt from income tax 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, · the foreign service is directly attributable to an activity that is listed in subsection 23AG(1AA) of the ITAA 1936, and · the foreign earnings are not exempt from income tax in the foreign country only because of one of the reasons listed in subsection 23AG(2) of the ITAA 1936. A person is 'deployed' within the meaning of paragraph 23AG(1AA)(d) of the ITAA 1936 if they have been directed to perform duties overseas by the Commonwealth, a State or a Territory or an authority thereof in their capacity as a member of a disciplined force. This includes the member being sent overseas to undertake or participate in study or training activities in their capacity as a member of the relevant disciplined force. Given a consideration of the whole arrangement, it is accepted that you meet the above criteria and the income referable to your foreign service is exempt from income tax in Australia.