ATO Interpretative Decision

ATO ID 2004/704

Income tax

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

Issue

Are the salary and wages received by an ADF member from serving in Rwanda with Operation TAMAR as part of Australia's contribution to UNAMIR assessable under subsection 25(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision

No. The salary and wages received by an ADF member from serving in Rwanda with Operation TAMAR as part of Australia's contribution to UNAMIR are not assessable under subsection 25(1) of the ITAA 1936 as the salary and wages are exempt under section 23AG of the ITAA 1936.

Facts

The taxpayer is a resident of Australia for income tax purposes.

The taxpayer is a member of the ADF.

The taxpayer served in Rwanda as part of Operation TAMAR.

Operation TAMAR concerned the deployment of ADF members to serve in Rwanda as part of Australia's contribution to UNAMIR between 22 October 1993 and 8 March 1996.

The taxpayer served in Rwanda for a continuous period of not less than 91 days.

The taxpayer received salary and wages in relation to that service.

A certificate under paragraph 23AD(1)(a) of the ITAA 1936 has not been issued by the Chief of the Defence Force to the effect that the taxpayer is on eligible duty with a specified organisation in a specified area outside Australia.

There is no double tax agreement between Australia and Rwanda.

The law of Rwanda provides for the imposition of income tax on employment income and does not generally exempt such income from income tax.

The Government of Rwanda and the United Nations (UN) concluded the 'Agreement on the status of the United Nations Assistance Mission for Rwanda (UNAMIR)' (the UNAMIR Agreement) which was signed on 5 November 1993.

The process by which Australia participated in UNAMIR did not result in Australia becoming a party to the UNAMIR Agreement or to any other international agreement concerning UNAMIR.

Reasons for Decision

Subsection 25(1) of the ITAA 1936 provides that the assessable income of a resident taxpayer includes gross income derived directly or indirectly from all sources during the income year which is not exempt income.

Salary and wages are ordinary income for the purposes of subsection 25(1) of the ITAA 1936.

However, subsection 23AG(1) of the ITAA 1936 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 will be exempt from tax in Australia. 'Foreign service' includes service in a foreign country in the capacity as an employee and 'foreign earnings' includes income consisting of salary and wages (subsection 23AG(7) of the ITAA 1936).

Subsection 23AG(2) of the ITAA 1936 provides that the exemption in subsection 23AG(1) of the ITAA 1936 will not apply where the income is exempt from income tax in the foreign country only because of any of the following reasons:

(a)

a law of the foreign country giving effect to a double tax agreement;

(b)

a double tax agreement;

(c)

provisions of a law of the foreign country under which income covered by any 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 Organizations (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;

(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).

There is no double tax agreement between Australia and Rwanda. Therefore, paragraphs (a) and (b) of subsection 23AG(2) of the ITAA 1936 do not apply.

The law of Rwanda provides for the imposition of income tax on employment income and does not generally exempt such income from income tax. Therefore, paragraphs (c) and (d) of subsection 23AG(2) of the ITAA 1936 do not apply.

The salary and wages received by the taxpayer were not exempt in Rwanda because of a law (or regulations) of Rwanda corresponding to the International Organizations (Privileges and Immunities) Act 1963 and as such paragraph 23AG(2)(e) of the ITAA 1936 does not apply.

The process by which Australia participated in UNAMIR did not result in Australia becoming a party to the UNAMIR Agreement or to any other international agreement concerning UNAMIR.

Therefore, paragraphs (f) and (g) of subsection 23AG(2) of the ITAA 1936 do not apply.

Therefore, as none of the reasons listed in subsection 23AG(2) of the ITAA 1936 apply, the salary and wages received by an ADF member from serving in Rwanda with Operation TAMAR as part of Australia's contribution to UNAMIR will be exempt from income tax under subsection 23AG(1) of the ITAA 1936 and will not be assessable under subsection 25(1) of the ITAA 1936.

Year of income:  Year ended 30 June 1994 Year ended 30 June 1995 Year ended 30 June 1996

Legislative References:
Income Tax Assessment Act 1936
   paragraph 23AD(1)(a)
   section 23AG
   subsection 23AG(1)
   subsection 23AG(2)
   paragraph 23AG(2)(a)
   paragraph 23AG(2)(b)
   paragraph 23AG(2)(c)
   paragraph 23AG(2)(d)
   paragraph 23AG(2)(e)
   paragraph 23AG(2)(f)
   subparagraph 23AG(2)(f)(ii)
   paragraph 23AG(2)(g)
   subsection 23AG(7)
   subsection 25(1)

Other References:
Agreement on the status of the United Nations Assistance Mission for Rwanda

Keywords
Defence force overseas service
Exempt income
Foreign income
Foreign salary and wages
Rwanda

Business Line:  Public Groups and International

Date of publication:  27 August 2004

ISSN: 1445-2782