Private ruling: Foreign exempt income
Published: June 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are the salary and allowances you earned while employed overseas exempt from income tax in Australia? | A1: Yes

Relevant facts and circumstances: You are an Australian resident for income tax purposes. You were deployed to work in an overseas country for a continuous period that is greater than 91 days. You were deployed under an Australia aid program (the Project). The Project was funded by AusAID. There is a memorandum of understanding between Australia and the overseas country that exempts your income from taxation in the overseas country.

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

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 were engaged in foreign service for a continuous period of at least 91 days • you derived 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. In your case, you are a resident of Australia and a natural person. You were deployed to an overseas country by your employer under an Australia aid program (the Project). The Project was funded by AusAID as part of Australian official development assistance (ODA). Accordingly, your employer is delivering ODA and you foreign service is directly attributable to that delivery. There is a Memorandum of Understanding between the governments of Australia and the overseas country that exempts your income from your foreign service from taxation in the overseas country. In consideration of the above discussion, the income that you derived in the overseas country while working on the Project is exempt from taxation in Australia.