Private ruling: Assessability of foreign employment income
Published: May 2014
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Are the salary and allowances you receive 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 to provide official development assistance. You have been working in Country X for a continuous period greater than 91 days. There is no memorandum of understanding between Australia and Country X that exempts the income from taxation in Country X. There is no double taxation agreement between Australia and Country X. Country X normally taxes salary and wage income.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5. | Income Tax Assessment Act 1997 Section 6-15. | Income Tax Assessment Act 1997 Section 11-15. | Income Tax Assessment Act 1936 Section 23AG.

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Salary and wages are ordinary income for the purpose of subsection 6-5(2) of the ITAA 1997. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not included in assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income that may be exempt. Included in this list is section 23AG of the Income Tax Assessment Act (ITAA 1936), which deals with foreign earnings. The subsections of section 23AG of the ITAA 1936 that are relevant are: • subsection 23AG(1) of the ITAA 1936 which considers the length of continuous service, and • subsection 23AG(1AA) of the ITAA 1936 which provides the type of eligible overseas service, and • subsection 23AG(2) of the ITAA 1936 which considers whether the income is excluded. In your case: • the period of your continuous service is greater than 91 days, and • the overseas service is eligible as you are outside of Australia employed by an Australian government department to provide official development assistance, and • the income is not excluded by subsections 23AG(2) of the ITAA 1936. Therefore the salary and allowances you receive while employed overseas are exempt from income tax in Australia under section 23AG of the ITAA 1936.