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ATO Interpretative Decision

ATO ID 2001/775

Income Tax

Salary or wages income derived prior to 1 July from employment in Norfolk Island - exempt income
FOI status: may be released
  • This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 taxpayer's salary and wage income derived prior to 1 July 2016 from employment in Norfolk Island assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. The taxpayer's salary and wage income derived prior to 1 July 2016 from employment in Norfolk Island is not assessable under section 6-5 of the ITAA 1997 as it is exempt from tax under section 24G of the Income Tax Assessment Act 1936 (ITAA 1936).

Facts

The taxpayer will be employed in Norfolk Island for three years and commences on 31 March 2016.

The contract of employment binds the taxpayer to a continuity of service.

The duties of the taxpayer's position will be performed wholly within the boundaries of Norfolk Island.

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. However, if an amount is exempt income, it is not included in the assessable income of a taxpayer (subsection 6-15(2) of the ITAA 1997).

Section 24G of the ITAA 1936 provides an exemption from tax in Australia on certain income derived from sources in a prescribed Territory. Subsection 24B(1) of the ITAA 1936 provides that Norfolk Island is a prescribed Territory.

Paragraph 24G(1)(e) of the ITAA 1936 provides that the exemption will apply where income is derived by a person from employment wholly or mainly performed in a prescribed Territory. The Commissioner must be satisfied that at the commencement of that employment the taxpayer intended to remain in that Territory for a continuous period of more than 6 months.

The taxpayer's employment will be wholly performed within the boundaries of Norfolk Island, a prescribed Territory. The posting is for a period of three years and the terms of the contract of employment indicate the requisite continuity of service. Therefore, salary and wage income paid to the taxpayer prior to 1 July 2016 from employment in Norfolk Island will be exempt from tax pursuant to section 24G of the ITAA 1936.

Note 1: the taxpayer is liable to income tax in Australia on any other income.
Note 2: due the repeal of section 24G and other provisions relating to External Territories, from 1 July 2016 all income from an office or employment is assessable income under section 6-5 of the ITAA 1997.

Amendment History

Date of amendment Part Comment
10 June 2016 Title Add 'prior to 1 July 2016'
Issue Add 'prior to 1 July 2016'
Decision Add 'prior to 1 July 2016'
Facts Add 'and commences on 31 March 2016'.
Reasons for decision Wording adjusted in text and Note 1, and Note 2 added to accommodate change in the law effective 1 July 2016 under Tax and Superannuation Laws Amendment (Norfolk Island Reforms) Act 2015.
6 June 2014 Reasons for Decision Updated legislative references and adjusted wording to better reflect the legislation and improve clarity.
Legislative References Updated.
Keywords Added keyword.

Date of decision:  1 October 2001

Legislative References:
Income Tax Assessment Act 1936
   subsection 24B(1)
   section 24G
   paragraph 24G(1)(e)

Income Tax Assessment Act 1997
   section 6-5
   subsection 6-5(2)
   subsection 6-15(2)

Keywords
Exempt income
Australian external territories
Prescribed Territory
Norfolk Island

Siebel/TDMS Reference Number:  DW274522; 1-58841X0; 1-7T3A5TX

Business Line:  Small Business/Individual Taxpayers

Date of publication:  12 December 2001

ISSN: 1445-2782

history
  Date: Version:
  1 October 2001 Original statement
  6 June 2014 Updated statement
You are here 10 June 2016 Updated statement

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