ATO Interpretative Decision
ATO ID 2002/599 (Withdrawn)
Income Tax
Income - ADF members on long-term diplomatic posting in East TimorFOI 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This ATO ID is withdrawn from the database due to legislative changes to section 23AG of the Income Tax Assessment Act 1936 which took effect from 1 July 2009.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 from income years up to midnight of the date of East Timor's independence on 20 May 2002.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Withdrawn 26 August 2011
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Are salary and allowances received by the taxpayer exempt from income tax under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936) where the taxpayer is a member of the Australian Defence Force on a long-term, diplomatic posting to East Timor?
Decision
No. The salary and allowances received by the taxpayer are not exempt from income tax under section 23AG of the ITAA where the taxpayer is a member of the Australian Defence Force and is on a long-term diplomatic posting to East Timor, as the diplomatic exception to the exemption (contained in paragraph 23AG(2)(f) of the ITAA 1936) applies.
Facts
The taxpayer is a member of the Australian Defence Force. The Department of Defence paid all salary and allowances to the taxpayer in respect of their overseas service.
The taxpayer is posted to East Timor for a period of 12 months.
The taxpayer is attached to the Australian Mission to East Timor. The taxpayer performs duties at the instruction of the Australian Mission. The taxpayer is recognised as having diplomatic status in East Timor as they are one of Australia's representative staff.
The taxpayer's overseas service income is not exempt under section 23AD of the ITAA 1936.
Reasons for Decision
Subsection 23AG(1) of the ITAA 1936 provides a general exemption from income tax for the foreign earnings of an Australian resident taxpayer who works overseas for a continuous period of not less than 91 days.
Subsection 23AG(2) of the ITAA 1936 withdraws that exemption where the foreign earnings are exempt from income tax in the foreign country only because of any of the following reasons:
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- A double tax agreement or law of that foreign country that gives effect to a double tax agreement;
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- The foreign country exempts income from employment or does not tax employment income generally; or
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- A law of another country or an international agreement with which Australia is a party dealing with the privileges and immunities of diplomats or consuls, or of persons connected with international organisations.
UNTAET Regulation 2000/31, On the Establishment of Representative Offices of Foreign Governments in East Timor, of 27 September 2000, provides for the granting of privileges and immunities to representatives of foreign governments in East Timor.
Subsection 20.3 of UNTAET Regulation 2000/31 exempts from taxation in East Timor: the salary and emoluments of the members of representative staff paid to them by the foreign government they represent. Section 1 of UNTAET Regulation 2000/31 defines representative staff as meaning persons employed by a foreign government to serve with its representative office. Australia's representative office in East Timor is the Australian Mission to East Timor.
The taxpayer is employed by the Australian government to serve in the Australian Mission. The taxpayer is considered to be a member of Australia's representative staff. The taxpayer's salary and allowances paid in respect of their service whilst attached to the Australian Mission to East Timor is exempt from East Timorese tax under subsection 20.3 of UNTAET Regulation 2000/31.
The salary and allowances earned by the taxpayer during their attachment to the Australian Mission is exempt from East Timorese tax as a result of the operation of an international agreement to which Australia is a party or an international law regarding the privileges and immunities of diplomats. Paragraph 23AG(2)(f) of the ITAA 1936 withdraws the exemption for overseas employment income in respect of the income earned during the taxpayer's attachment to the Australian Mission.
The salary and allowances earned by the taxpayer during their diplomatic posting are not exempt from income tax in Australia under subsection 23AG(1) of the ITAA 1936. The taxpayer will be required to include the amount as assessable income for the relevant income year.
Year of income: 30 June 2001 30 June 2002
Legislative References:
Income Tax Assessment Act 1936
section 23AD
section 23AG
subsection 23AG(1)
subsection 23AG(2)
paragraph 23AG(2)(f)
ATO ID 2001/608
ATO ID 2002/601
ATO ID 2002/600 ATO Interpretative Decisions overturned by this decision
ATO ID 2001/178
Other References:
UNTAET Regulation 2000/31, On the Establishment of Representative Offices of Foreign Governments in East Timor, of 27 September 2000, Section 1, Subsection 20.3
Vienna Convention on Diplomatic Relations
Keywords
Foreign income
Defence force overseas service
Defence force members
ISSN: 1445-2782
| Date: | Version: | |
| 2 May 2002 | Original statement | |
| You are here → | 26 August 2011 | Archived |