ATO Interpretative Decision
ATO ID 2006/199 (Withdrawn)
Income Tax
Assessability of allowances received from employment in an overseas locationFOI status: may be released
-
This ATO ID is withdrawn from the database due to legislative changes to section 23AG of the Income Tax Assessment Act 1936 which took effect from 1 July 2009.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 ATOID 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.
Status of this decision: Decision Withdrawn 25 March 2011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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the service and uniform allowances received by an Australian Defence Force (ADF) employee serving in an overseas location assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. The service and uniform allowances received by an ADF employee serving in an overseas location are not assessable income under subsection 6-5(2) of the ITAA 1997 as they are exempt under subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936).
Facts
The taxpayer is a resident of Australia for income tax purpose.
The taxpayer is a member of the ADF.
The taxpayer was deployed to an overseas location for a continuous period of not less than 91 days.
Along with the salary, the taxpayer received a service allowance and a uniform allowance while serving in the overseas location.
The service allowance is paid fortnightly to recognise the special demands and conditions of service life. The uniform allowance is paid fortnightly to assist the ADF member with the cost of additional items of uniform as well as maintaining their uniform to the required standard.
The salaries and allowances are exempt from income tax in the foreign country in accordance with the Treaty on Development Cooperation between the Government of Australia and the Government of the foreign country (the Treaty).
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 allowances 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 from foreign service 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 salary or 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 only because of any of the reasons listed.
The exemption from tax in the foreign country under the Treaty is a specific exemption and it is a reason not listed in subsection 23AG(2) of the ITAA 1936. None of other reasons listed in subsection 23AG(2) apply to the taxpayer.
The service and uniform allowances received by the taxpayer come within the definition of 'foreign earnings' under subsection 23AG(7) of the ITAA 1936.
The service and uniform allowances received by the taxpayer that relate to the period of foreign service are foreign earnings derived from that foreign service under subsection 23AG(1) of the ITAA 1936.
As the taxpayer has been engaged in foreign service for a continuous period of not less than 91 days, the allowances received by the taxpayer will be exempt from income tax under subsection 23AG(1) of the ITAA 1936.
Accordingly, the service and uniform allowances received by the taxpayer while serving in an overseas location are not assessable income under subsection 6-5(2) of the ITAA 1997.
Date of decision: 24 July 2006Year of income: Year ended 30 June 1999 Year ended 30 June 2000 Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1936
section 23AG
subsection 23AG(1)
subsection 23AG(2)
subsection 23AG(7)
subsection 6-5(2)
subsection 6-15(2)
section 11-15
Related Public Rulings (including Determinations)
Taxation Determination TD 2005/15
Keywords
Defence force overseas service
Exempt income
Foreign income
Foreign salary and wages
International tax
ISSN: 1445-2782
| Date: | Version: | |
| 24 July 2006 | Original statement | |
| You are here → | 25 March 2011 | Archived |