Document ID: chunk:federal_register_of_legislation:C2025C00014:section:23ag:p2
Version: federal_register_of_legislation:C2025C00014
Segment Type: section
Provision Reference: s 23AG (pt 2/5)
Character Range: 122819–125500

of the following categories is generally exempt from income tax:
 (i) income derived in the capacity of an employee;
 (ii) income from personal services;
 (iii) similar income;
 (d) the law of the foreign country does not provide for the imposition of income tax on one or more of the categories of income mentioned in paragraph (c);
 (e) a law of the foreign country corresponding to the International Organisations (Privileges and Immunities) Act 1963 or to the regulations under that Act;
 (f) an international agreement to which Australia is a party and that deals with:
 (i) diplomatic or consular privileges and immunities; or
 (ii) privileges and immunities in relation to persons connected with international organisations;
 (g) a law of the foreign country giving effect to an agreement covered by paragraph (f).
 (2A) Subsection (2) does not apply in relation to foreign earnings to the extent that the person derived them from foreign service in Iraq after 31 December 2002 but before 1 May 2004.
 (3) If the income of a taxpayer of a year of income consists of an amount that is exempt from tax under this section (in this section called the exempt amount) and other income, the amount of tax (if any) payable in respect of the other income is calculated using the formula:

where:
Notional gross tax means the number of whole dollars in the amount of income tax that would be assessed under this Act in respect of the taxpayer's taxable income of the year of income if:
 (a) the exempt amount were not exempt income; and
 (aa) if the exempt amount is a payment covered by section 83‑240 or 305‑65 of the Income Tax Assessment Act 1997—the exempt amount (excluding any part of that amount that represented contributions made by the taxpayer) were assessable income of the taxpayer; and
 (b) the taxpayer were not entitled to any rebate of tax.
Notional gross taxable income means the number of whole dollars in the amount that would have been the taxpayer's taxable income of the year of income if the exempt amount were not exempt income.
Other taxable income means the amount (if any) remaining after deducting from so much of the other income as is assessable income:
 (d) any deductions allowable to the taxpayer in relation to the year of income that relate exclusively to that assessable income; and
 (e) so much of any other deductions (other than apportionable deductions) allowable to the taxpayer in relation to the year of income as, in the opinion of the Commissioner, may appropriately be related to that assessable income; and
 (f) the amount calculated using the formula in subsection (4).
 (4) The formula referred to in paragraph (3)(f) is:

where: