US Force posture initiatives
On 12 August 2014, the Government of Australia and the Government of the US signed The Force Posture Agreement which provides a legal, policy and financial framework to govern two new force posture initiatives in Australia and contains important protections and assurances for both jurisdictions.
Subsection 23AA(5) of the Income Tax Assessment Act 1936 (ITAA) currently provides for an income tax exemption for income derived by US contractors (wholly and exclusively in connection with approved projects). Schedule 3 of this Bill amends subsection 23AA(1) of the ITAA 1936 to include the force posture initiatives in the definition of an 'approved project'.
This means income derived by US contractors (and certain other entities) in connection with the force posture initiatives will be deemed to have been derived from sources outside Australia. This income will be exempt from Australian income tax, provided that the income is not exempt from income tax in the US.
The income tax exemption will apply to the 2014–15 income year and later income years.
Legislation and supporting material
On 12 December 2014, the Tax and Superannuation Laws Amendment (2014 Measures No. 6) Bill 2014External Link received royal assent. Reference chapter 3 titled US Force posture initiatives Explanatory MemorandumExternal Link.
Income derived by US contractors from approved projects will be exempt from Australian income tax provided the income is not exempt from income tax in the US.