ATO Interpretative Decision

ATO ID 2005/231

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 Australian Defence Force (ADF) member serving in Sierra Leone with Operation HUSKY as part of Australia's contribution to the United Nations Assistance Mission for Sierra Leone (UNAMSIL) assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. The salary and wages received by a resident ADF member from serving in Sierra Leone with Operation HUSKY as part of Australia's contribution to the UNAMSIL is not assessable under subsection 6-5(2) of the ITAA 1997 as it is exempt under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936).

Facts

The taxpayer is an Australian resident for income tax purposes.

The taxpayer is a member of the ADF.

The taxpayer served in Sierra Leone as part of Operation HUSKY.

Operation HUSKY involved the deployment of ADF members to serve in Sierra Leone as part of Australia's contribution to the UNAMSIL commencing 15 January 2001 and continuing in an ongoing manner.

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

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

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 Sierra Leone.

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

Australia participated in the UNAMSIL pursuant to the terms of a Memorandum of Understanding (MOU) between the United Nations and Australia, which set out the terms and conditions of Australia's contribution to the mission.

The MOU did not result in Australia becoming a party to any international agreement concerning diplomatic or consular privileges and immunities or privileges and immunities in relation to persons connected with an international organisation.

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, whether in or out of Australia, 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 it is not included in 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 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 earnings, salary, wages and allowances (subsection 23AG(7) of the ITAA 1936).

However 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 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 Organisations (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; or

(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 Sierra Leone. Therefore, paragraphs 23AG(2)(a) and 23AG(2)(b) of the ITAA 1936 do not apply.

The law of Sierra Leone 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 do not apply.

The salary and wages received by the taxpayer were not exempt in Sierra Leone because of a law (or regulation) of Sierra Leone 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 UNAMSIL did not result in Australia becoming a party to the UNAMSIL Agreement or to any other international agreement concerning UNAMSIL. Therefore, paragraphs 23AG(2)(f) and 23AG(2)(g) of the ITAA 1936 do not apply.

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 Sierra Leone with Operation HUSKY as part of Australia's contribution to UNAMSIL will not be assessable under subsection 6-5(2) of the ITAA 1997 as it is exempt from income tax under subsection 23AG(1) of the ITAA 1936,.

Year of income:  Year ended 30 June 2002 Year ended 30 June 2003

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)
   paragraph 23AG(2)(g)
   subsection 23AG(7)

Keywords
Exempt income
International tax
Resident/residency
Salary
Sierra Leone
Wages

Business Line:  Public Groups and International

Date of publication:  12 August 2005

ISSN: 1445-2782