Taxation Determination TD 2005/14
Date of effect: 11 May 2005




Examples: Example 1: Exempt income  foreign worker with foreign earnings exempt from tax in foreign country 7. An Australian resident derives foreign earnings in a foreign country. The foreign earnings are exempt from tax in that country for the following reasons: 8. The first reason set out above is a reason covered by paragraph 23AG(2)(e). The second is covered by paragraph 23AG(2)(b). 9. In these circumstances, provided there is no reason for exempting the income additional to those listed in subsection 23AG(2), [3] the subsection applies. Therefore, the foreign earnings are not exempt from tax under section 23AG. © 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/D83

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 ('Australian tax'). 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 Australian tax does not apply if the foreign earnings are exempt from foreign tax 'only because of any of the following' reasons set out in subsection 23AG(2). Subsection 23AG(2) provides: 4. The application of subsection 23AG(2) depends, among other things, on whether the phrase 'only because of any of the following' can be construed to mean: [2] 5. The correct view is considered to be the first of these meanings. The second meaning would result in foreign earnings which are exempt from foreign tax for two or more of the listed reasons also being exempt from Australian tax. It is not considered that Parliament intended this result. 6. Where foreign earnings are exempt from foreign tax only because of one or more reasons listed in subsection 23AG(2), the exemption in subsection 23AG(1) does not apply and those earnings will be subject to Australian tax.


Example 1: Exempt income  foreign aid worker with foreign earnings exempt from tax in foreign country | 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. Yes. Subsection 23AG(2) of the Income Tax Assessment Act 1936 applies where one or more reasons listed in that subsection for exempting the income from foreign tax are satisfied, provided there are no other reasons for exempting the income. [1] As a result, the income is subject to taxation in Australia because the exemption in subsection 23AG(1) does not apply. | 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 Taxation Ruling TR 2006/10 Public Rulings). | Commissioner of Taxation 11 May 2005 | 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. | Footnotes: (determiner) 2. in whatever quantity or number, great or small; | (phrase) 10. any one …, any single or individual (person or thing).


Related rulings: TR 2006/10 TD 2005/15
Legislative references: ITAA 1936 23AG(1) ITAA 1936 23AG(2) ITAA 1936 23AG(2)(b) ITAA 1936 23AG(2)(e) ITAA 1936 23AG(7) International Organisations (Privileges and Immunities) Act 1963
Other references: Macquarie Dictionary [Multimedia] version 5.0.0, 1/10/01