ATO Interpretative Decision

ATO ID 2001/152

Income Tax

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Whether the income derived by the taxpayer from working on an approved overseas aid project for a period of 83 days is exempt under section 23AF of the Income Tax Assessment Act 1936 (ITAA 1936) where the period of engagement occurs eight months after the taxpayer was engaged on the same aid project for a period of service that qualified for the tax exemption.

Decision

The income derived during the 83 days of service will not be exempt from tax under section 23AF (ITAA 1936) as it is considered to be a separate period of service, which is not of a sufficient duration to qualify for the tax exemption.

Facts

The taxpayer performs personal services on an overseas aid project in a foreign country for a period of 24 months. The overseas aid project is an 'approved project' for the purposes of section 23AF(11) (ITAA1936) and the foreign remuneration received by the taxpayer in respect of service performed on the project during this period is exempt from tax under section 23AF (ITAA 1936).

At the end of the 24 months of service required by the taxpayer's contract, the taxpayer returns to Australia.

Eight months after returning to Australia, the taxpayer returns to work on the approved project to perform review activities for a period of 83 days under a new contract.

Reasons For Decision

Subsection 23AF(1) (ITAA1936) provides that where a taxpayer has engaged in qualifying service on an approved project for a continuous period of 91 days or more, then any income that is derived by the taxpayer in relation to the qualifying service will be exempt from tax.

The 83 day period, on its own, is obviously of an insufficient duration to qualify for the exemption.

However, periods in which a person is not performing personal services on an approved project may still be treated as part of one continuous period of qualifying service where:

(a)

the absence from the approved project is due to either eligible leave or accident, illness or incapacity (paragraphs 23AF(3)(c) and (d), subsection 23AF(5) and (9) (ITAA 1936)), or;

(b)

the absence is caused by travel between the project site and Australia, and the travelling time is reasonable (paragraphs 23AF(3)(b) and subsection 23AF(4) (ITAA 1936)); or

(c)

the continuity of service on the particular project is broken by unforseen circumstances (subsection 23AF(6) (ITAA 1936)).

Similarly, where there is an intervening period or periods spent in Australia between separate periods of qualifying service, and the total of the intervening periods does not exceed one-sixth of the total of the periods of qualifying service on the project (subsection 23AF(8) (ITAA 1936)), then the separate periods of qualifying service shall together be taken to constitute a continuous period of qualifying service.

As the taxpayer's absence from the project during the period from 1 July 2000 to May 2001 was not due to any of the factors listed above at (a), (b) or (c), and it exceeds one-sixth of the total period, the taxpayer would not be entitled to include this period in his period of qualifying service.

Legislative References:
Income Tax Assessment Act 1936
   section 23AF
   subsection 23AF(1)
   subsection 23AF(3)
   subsection 23AF(4)
   subsection 23AF(5)
   subsection 23AF(6)
   subsection 23AF(8)

Related ATO Interpretative Decisions
TR 96/15

Keywords
Income
International tax
Exempt income
Approved overseas projects
Foreign salary & wages

Business Line:  Small Business/Individual Taxpayers

Date of publication:  1 August 2001

ISSN: 1445-2782