Taxation Determination TD 2005/15
Date of effect: 11 May 2005




Examples: Example 1: Exempt income - foreign aid worker 9. The foreign earnings of an Australian resident volunteer aid worker in a foreign country are exempt from taxation in that foreign country because of a Double Tax Agreement concluded with Australia ('DTA') and also because of a Memorandum of Understanding ('MoU') between the Government of that foreign country and an aid organisation. [2] The MoU is not one to which Australia is a party. 10. The exemption from tax in the foreign country as a result of the MoU is a reason for exempting the foreign earnings from foreign tax that is outside subsection 23AG(2). Therefore, regardless of the existence of the DTA, subsection 23AG(2) does not apply and the foreign earnings will be exempt from Australian tax under subsection 23AG(1). © AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). previously issued as TD 2004/D84

Appendix: 2. Subsection 23AG(1) provides that where a resident taxpayer is engaged in foreign service for a continuous period of not less than 91 days, any foreign earnings derived from the foreign service will be exempt from tax in Australia. The term 'foreign service' means service in a foreign country as the holder of an office or in the capacity of an employee and the term 'foreign earnings' includes income consisting of salary and wages and allowances: subsection 23AG(7) of the ITAA 1936. 3. Subsection 23AG(1) is subject to subsection 23AG(2) so that the exemption from tax in Australia in subsection 23AG(1) does not apply if the income is exempt from taxation in the foreign country ' only because of any of' the reasons set out in subsection 23AG(2). 4. The word 'only' is not defined and accordingly takes its ordinary meaning shaped by the context. The Australian Oxford Dictionary relevantly defines the word 'only' to mean 'solely, merely, exclusively; and no one or nothing more besides'. 5. The Explanatory Memorandum to the Taxation Laws Amendment Act (No. 2) 1991 (the EM) at page 82 provides the following context regarding the meaning of 'only': 6. Accordingly, the use of the word 'only' in subsection 23AG(2) means that the reasons listed in that subsection must be the sole reasons for exempting the foreign earnings from tax in the foreign country. 7. The example provided on page 84 of the EM is consistent with this interpretation. 8. Therefore, if a reason for exempting the foreign earnings from tax in the foreign country is not one of the reasons listed in subsection 23AG(2), the exemption in subsection 23AG(1) continues to apply, provided the other requirements of the section are satisfied.


If this Determination applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Determination. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Determination. | [Note: This is a consolidated version of this document. Refer to the Legal database ( ato.gov.au/law ) to check its currency and to view the details of all changes.] | Ruling: 1. No. Subsection 23AG(2) of the Income Tax Assessment Act 1936 (ITAA 1936) does not apply if there is a reason for exempting the foreign earnings that is not listed in that subsection, even if another reason for exempting these earnings, that is listed, also applies. [1] As a result, the foreign earnings remain exempt from Australian tax under subsection 23AG(1). | Date of effect: 1A. This Determination applies to years commencing both before and after its date of issue. However, it does not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of the Determination (see paragraphs 75 and 76 of TR 2006/10 Public Rulings). | Commissioner of Taxation 11 May 2005 | Once the law is changed, foreign earnings that are exempt from tax overseas will also be exempt in Australia except where they are exempt in the overseas country solely because [of the reasons for exemption set out in s23AG(2)]. | Appendix 2  Example: This Appendix provides an example which illustrates the principles in the Determination. Decisions on individual cases will depend on the overall circumstances of that case. Consequently, the conclusions reached in the following example are not necessarily determinative of the Commissioner's views on cases with similar, but different, facts.


Related rulings: TR 2006/10 TD 2005/14
Legislative references: TAA 1953 Pt IVAAA ITAA 1936 23AG(1) ITAA 1936 23AG(2) ITAA 1936 23AG(7)
Case references: Tanddo v Commissioner of Taxation [2022] AATA 4143
Other references: Explanatory Memorandum to the Taxation Laws Amendment Act (No. 2) 1991 Australia Oxford Dictionary