Private ruling: Section 23AG - exempt foreign income
Date of advice: 15 June 2022
Published: August 2022
Ruling period: Year Ending 30 June 20XX | Year Ending 30 June 20XX | Year Ending 30 June 20XX | Year Ending 30 June 20XX
Date scheme commenced: 20 April 20XX

Ruling: Q1: Is your foreign income earned while working for an employer in Country A exempt from tax in Australia under section 23AG of the Income Tax Assessment Act 1936 ? | A1: Yes. Your employment in Country A for your employer satisfies the conditions of paragraph 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. Furthermore, subsection 23AG(2) of the ITAA 1936 does not prevent the exemption as your employment income is exempt from income tax in Country A under the Subsidiary Arrangement between the Government of Australia and the Government of Country A relating to The Official Development Assistance Project, which is a reason outside those listed in subsection 23AG(2). Therefore, income earned during your period of foreign service is exempt from taxation in Australia under section 23AG of the ITAA 1936.

Relevant facts and circumstances: You are an Australian resident for taxation purposes. You are employed by a company contracted to provide services to an official development assistance project being undertaken in Country A for the Commonwealth of Australia through the Department of Foreign Affairs and Trade (DFAT). Your period of foreign service will begin on 10 June 20XX and you expect it to continue until 30 June 20XX. Your continuous period of foreign service will last for longer than 91 days. You have supplied a letter dated 12 July 20XX which confirms that your foreign service is covered under Section 11 of the "Subsidiary Arrangement between the Government of Australia and the Government of Country A". The Treaty on Development Co-operation between the Government of Australia and the Government of Country A(the Treaty) sets out arrangements relating to development co-operation between Australia and Country A. Clause 12(1)(a) of the Annex to the Treaty (the Annex) provides for an exemption from tax in Country A on salaries and allowances derived by Australian government funded personnel from activities to which the Annex applies. Clause 17 of the Annex provides that in relation to activities under the Annex, Australia and Country A may enter into specific subsidiary arrangements for their implementation. Clause 1.1 of the Subsidiary Arrangement between the Government of Australia and the Government of Country A relating to The Official Development Assistance Project(the Subsidiary Arrangement)provides that the terms of the Treaty apply to the Subsidiary Arrangement. Clause 11 of the Subsidiary Arrangement provides that the Government of Country A will facilitate the deployment of Government of Australia funded personnel required for the purposes of The Official Development Assistance Project by granting exemption from tax on salaries and allowances.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 23AG