ATO Interpretative Decision

ATO ID 2004/647

Income tax

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

Issue

Are salary and wages received by an Australian resident taxpayer from working in the Hashemite Kingdom of Jordan (Jordan), assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. The salary and wages received by an Australian resident taxpayer from working in Jordan are not assessable under subsection 6-5(2) of the ITAA 1997 as they are exempt from tax under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936).

Facts

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

The taxpayer worked in Jordan for a continuous period of not less than 91 days.

The taxpayer received salary and wages in respect of that employment.

The tax laws of Jordan provide for the imposition of income tax on employment income and do not generally exempt such income from tax.

The salary and wages received by the taxpayer are not exempt in Jordan because of a law (or regulations) corresponding to the International Organizations (Privileges and Immunities) Act 1963 or under an international agreement to which Australia is a party that deals with privileges and immunities of persons connected with international organisations or relating to diplomatic or consular matters.

The salary and wages received by the taxpayer are not exempt in Jordan for any other reason.

Reasons for Decision

Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.

Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income.

Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 23AG of the ITAA 1936 which deals with overseas employment income.

Subsection 23AG(1) of the ITAA 1936 provides that where a resident is engaged in foreign service for a continuous period of not less than 91 days, foreign earnings derived from that service will be exempt. 'Foreign service' includes service in a foreign country in the capacity of an employee and 'foreign earnings' includes salary and wages income (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 tax in the foreign country only because of any of the reasons listed therein.

One of the reasons listed is where the income is exempt in the foreign country because of a double tax agreement (paragraphs 23AG(2)(a) and 23AG(2)(b) of the ITAA 1936).

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

Paragraph 23AG(2)(c) and 23AG(2)(d) of the ITAA 1936 list further exceptions that apply where the income is exempt in the foreign country because the law of the foreign country either generally exempts from income tax, or does not provide for the imposition of income tax on one or more of the following categories of income:

(i)

income derived in the capacity of an employee

(ii)

income from personal services, or

(iii)

similar income.

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

The salary and wages received by the taxpayer are not exempt in Jordan because of a law (or regulations) of Jordan corresponding to the International Organizations (Privileges and Immunities) Act 1963. Further, the salary and wages are not exempt under an international agreement to which Australia is a party that deals with privileges and immunities of persons connected with international organisations or relating to diplomatic or consular matters. Paragraphs 23AG(2)(e), 23AG(2)(f) and 23AG(2)(g) of the ITAA 1936 will not apply.

As the taxpayer was employed in Jordan for a continuous period of not less than 91 days and the salary and wages are not exempt from tax in Jordan for any of the reasons listed in subsection 23AG(2) of the ITAA 1936, the income received from Jordan will be exempt from tax under subsection 23AG(1) of the ITAA 1936.

Accordingly, the salary and wages received by the resident taxpayer while employed in Jordan will not be assessable under subsection 6-5(2) of the ITAA 1997.

Year of income:  Year ended 30 June 2004 Year ended 30 June 2005

Legislative References:
Income Tax Assessment Act 1936
   section 23AG
   subsection 23AG(1)
   subsection 23AG(2)
   paragraph 23AG(2)(a)
   paragraph 23AG(2)(b)
   paragraph 23AG(2)(c)
   paragraph 23AG(2)(d)
   subsection 23AG(7)

Keywords
Exempt income
Foreign income
Jordan
International tax
Salary & wage income

Business Line:  Public Groups and International

Date of publication:  6 August 2004

ISSN: 1445-2782