ATO Interpretative Decision
ATO ID 2001/28
Income Tax
Overseas income: Salary of Resident Employed on Project In a Foreign CountryFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is salary earned by an Australian resident while employed on a project in a foreign country exempt from tax under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes. Salary earned by an Australian resident while employed on a project in a foreign country continuously for not less than 91 days is exempt from tax under section 23AG of the ITAA 1936.
Facts
A taxpayer is employed on a project in a foreign country continuously for not less than 91 days. The Australian and the foreign country governments have signed a Memorandum of Understanding (MoU). The article in the MOU states that salary earned by Australian personnel employed on the project is exempt from tax in the foreign country. Australia does not have a Double Tax Agreement with the foreign country.
Reasons For Decision
Foreign earnings of an Australian resident derived during a continuous period of not less than 91 days employment in a foreign country are generally exempt (Section 23AG ITAA 1936).
The exemption does not apply if the income is exempt from tax in the foreign country because of any of the reasons listed in subsection 23AG(2) of the ITAA 1936.
It is the agreement reached between Australia and the foreign country, in the form of a MoU, which exempts the taxpayer's earnings from tax in the foreign country.
As none of the other reasons listed in subsection 23AG(2) applies, the earnings are not exempt from tax in the foreign country because of one of the reasons listed in subsection 23AG(2) (ITAA 1936).
Consequently, the salary earned by the taxpayer is exempt from tax in Australia under section 23AG of the ITAA 1936.
Date of decision: 14 August 1998
Legislative References:
Income Tax Assessment Act 1936
section 23AG
Keywords
Exempt income
Foreign income
Foreign salary & wages
Net foreign income
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 14 August 1998 | Original statement |
| 17 December 2010 | Archived |