ATO Interpretative Decision
ATO ID 2002/176 (Withdrawn)
Income Tax
Assessability of foreign salary and wages from services performed on an overseas project in a country with which there is no Double Tax AgreementFOI status: may be released
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This ATO ID is withdrawn from the database due to legislative changes to section 23AG of the Income Tax Assessment Act 1936 which took effect from 1 July 2009. Despite its withdrawal, this ATO ID continues to be a precedential view in respect of decisions for income years up to, and including, the 2008/2009 income year.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the Australian resident taxpayer assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) on salary and wages from services performed on an overseas project in a foreign country?
Decision
No. The Australian resident taxpayer is not assessable under subsection 6-5(2) of the ITAA 1997 on salary and wages from services performed on an overseas project in a foreign country, as this income is exempt under subsection 23AG(1) of the Income Tax Assessment Act 1936 ( ITAA 1936).
Facts
The taxpayer is a resident of Australia.
The taxpayer is employed on a foreign aid project in a foreign country and earns salary and wages from that employment.
The taxpayer will work in the foreign country for a continuous period of at least 91 days.
The salary and wages earned by the taxpayer is not exempt from tax in the foreign country.
The foreign aid project has not been certified as an approved overseas project by the Minister of Trade.
There is no double tax agreement between Australia and the foreign country.
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.
In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). However, there is no double tax agreement between Australia and the foreign country and therefore the income tax laws will govern the assessability of the salary and wages.
Section 23AF of the ITAA 1936 deals with the exemption of certain income derived in respect of approved overseas projects. To be approved for the purposes of this section the project must be the subject of a certificate issued by the Minister of Trade (subsection 23AF(11) of the ITAA 1936).
As this project has not been certified as an approved overseas project the salary and wages earned by the taxpayer are not exempt under section 23AF of the ITAA 1936.
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 (subsection 23AG(7) of the ITAA 1936). 'Foreign earnings' includes income consisting of salary or wages (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 only because of any of the reasons listed therein. As the income derived by the taxpayer is not exempt from tax in the foreign country, the exception provided under subsection 23AG(2) will not apply.
Accordingly, the taxpayer's salary and wages will not be assessable under subsection 6-5(2) of the ITAA 1997 as the income is exempt under subsection 23AG(1) of the ITAA 1936.
Date of decision: 14 May 2001
Legislative References:
Income Tax Assessment Act 1936
section 23AF
subsection 23AF(11)
subsection 23AG(1)
subsection 23AG(2)
subsection 23AG(7)
subsection 6-5(2)
Keywords
Foreign income
Exempt income
Foreign salary & wages
Approved overseas projects
ISSN: 1445-2782
| Date: | Version: | |
| 14 May 2001 | Original statement | |
| You are here | 4 March 2011 | Archived |