Private ruling: Assessability of foreign income
Published: February 2015
Ruling period: 1 July 2014 to 30 June 2015.
Date scheme commenced: 1 July 2014.

Ruling: Question and answer: | Is the income from your overseas employment exempt from taxation in Australia? | Yes.

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You are employed overseas. You are an employee and have a contract of employment with your employer. Any recreation leave you take between July 2014 and June 2015 will be leave that has accrued during your employment in your current position. Your employer receives funding from Australia's official development assistance (ODA) program. You are responsible for implementing a program that is solely funded by Australian ODA. None of the exclusions for the exemption from income tax provided by section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936) apply to you. Your overseas employment income is exempt from tax for a reason not listed in subsection 23AG(2) of the ITAA1936.

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

Reasons for decision: Detailed Reasoning - Assessable income - general: As a general rule, and under the provisions of section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), the assessable income of an Australian resident taxpayer includes all the ordinary income they earn from all sources, in or out of Australia in an income year. Income in the form of salary, wages and allowances are all types of ordinary income. Although a payment may be considered ordinary income and will generally be assessable under the provisions of section 6-5 of the ITAA 1997, there are some instances where ordinary income may be excluded from an individual's assessable income in Australia. This will be the case for example if a specific provision of the tax law makes the income exempt from taxation in Australia. Exemption from taxation under section 23AG of the Income Tax Assessment Act 1936 Subsection 23AG(1) of the ITAA 1936 provides that foreign earnings are exempt from income tax in Australia 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. • From 1 July 2009 onwards, the foreign service is directly attributable to an activity that is listed in subsection 23AG(1AA) of the ITAA 1936 (the listed activities include the delivery of Australian ODA by your employer). • The foreign earnings must not be covered by subsection 23AG(2) of the ITAA 1936, the provisions of which make certain foreign earnings not exempt under section 23AG of the ITAA 1936. Based on the facts you have provided, it is accepted that you meet the criteria for the exemption under section 23AG of the ITAA 1936 to apply to the income from your overseas employment for the period 1 July 2014 to 30 June 2015.