ATO Interpretative Decision

ATO ID 2004/222 (Withdrawn)

Income Tax

• This ATO ID is withdrawn from the database due to legislative changes to section 23AG of the Income Tax Assessment Act 1936 which took effect from 1 July 2009.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.

Issue

Are the salary and wages received by an ADF member serving in Mozambique assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. The salary and wages received by an ADF member serving in Mozambique are not assessable under subsection 6-5(2) of the ITAA 1997 as the salary and wages are exempt under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936).

Facts

The taxpayer is a resident of Australia for income tax purposes.

The taxpayer is a member of the ADF.

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

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

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.

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

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.

Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not 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 is engaged in foreign service for a continuous period of not less than 91 days, foreign earnings derived from that service will be exempt. 'Foreign service' includes service in a foreign country in the capacity of an employee (subsection 23AG(7) of the ITAA 1936). 'Foreign earnings' includes salary and wages income (subsection 23AG(7) of the ITAA 1936).

Subsection 23AG(2) of the ITAA 1936 provides that no exemption is available under subsection 23AG(1) of the ITAA 1936 in circumstances where an amount of foreign earnings is exempt from tax in the foreign country solely because of:

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a double tax agreement or a law of a country that gives effect to such an agreement (paragraphs 23AG(2)(a) and 23AG(2)(b) of the ITAA 1936)

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a law of that foreign country which generally exempts from, or does not provide for, the imposition of income tax on income derived in the capacity of an employee, income from personal services or any other similar income (paragraphs 23AG(2)(c) and 23AG(2)(d) of the ITAA 1936), and

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a law or international agreement dealing with privileges and immunities of diplomats or consuls or of persons connected with international organisations (paragraphs 23AG(2)(e), 23AG(2)(f) and 23AG(2)(g) of the ITAA 1936).

There is no double tax agreement between Australia and Mozambique. Further, the law of Mozambique provides for the imposition of income tax on employment income and the taxpayer's earnings are not subject to any laws or agreements relating to privileges and immunities granted to persons connected with international organisations.

Therefore, as none of the reasons listed in subsection 23AG(2) of the ITAA 1936 apply, the salary and wages received by the ADF member from serving in Mozambique will be exempt from income tax under subsection 23AG(1) of the ITAA 1936 and will not be assessable under subsection 6-5(2) of the ITAA 1997.

Year of income:  Year ended 30 June 1996 Year ended 30 June 1997

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
Defence force overseas service
Exempt income
Foreign income
Foreign salary and wages
Mozambique

Business Line:  Public Groups and International

Date of publication:  12 March 2004

ISSN: 1445-2782