Private ruling: Assessability of income
Published: March 2014
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Question and answer | Are the salary and allowances you receive from your deployment to Country X with the AFP be exempt from income tax in Australia under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936)? | Yes

Relevant facts and circumstances: You are an Australian resident for income tax purposes. You are employed by a disciplined force of the Government of Australia. Your employer has extended your position for another year. During your assignment in Country X you will continue to be paid by your employer in Australian dollars deposited directly into your Australian bank account. Your remuneration will include: salary and allowances. The laws of Country X provide for the imposition of income tax and do not generally exempt employment income from income tax. There is no tax treaty between Australia and Country X. You are not attached to the Australian High Commission for Department of Foreign Affairs and Trade purposes. You do not have any diplomatic status or privileges.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 23AG Further issues for you to consider | N/A | Anti-avoidance rules | The application of Part IVA of the ITAA 1936 has not been considered as this topic is in the MEI low risk PART IVA list as specified in ORCLA.

Reasons for decision: Summary: Subsection Section 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 (one of which is that you are deployed outside Australia as a member of a disciplined force), 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. As an employee of the AFP, you are a member of a disciplined force for the purposes of section 23AG of the ITAA 1936. Considering the above and the facts of your case, it is accepted that you meet the criteria for the exemption under subsection 23AG(1) of the ITAA 1936 to apply to you. Accordingly, the income and allowances you earn that are referrable to your foreign service are exempt from income tax in Australia.