1012353423373 | Legal database

Disclaimer
This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1012353423373

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: Assessability of income

Question and answer:

Is the income you earned in Australia from the date of your discharge from hospital until the expected end date of your overseas deployment exempt from Australian income tax?

Yes.

This ruling applies for the following periods:

Year ended 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts

You are an Australian resident for taxation purposes.

You are a member of an Australian Government department.

You were deployed to country X for a set period.

During your deployment you suffered an injury and returned to Australia for hospital treatment.

After a short period you were discharged from hospital, and took leave to recover from your injury.

After a period of recoupment you returned to work.

Your income while actually overseas was exempt from income tax pursuant to another section of the Income Tax Law.

The tax laws of country X provide for the imposition of income tax on employment income and do not generally exempt such income from tax.

There is no tax treaty between Australia and country X.

Relevant legislative provisions

Subsection 23AG(1) of the Income Tax Assessment Act 1936

Paragraph 23AD(1)(a) of the Income Tax Assessment Act 1936

Subsection 23AD(1) of the Income Tax Assessment Act 1936

Paragraph 23AD(3)(c) of the Income Tax Assessment Act 1936

Subsection 23AG(7) of the Income Tax Assessment Act 1936

Paragraph 23AG(6)(b) of the Income Tax Assessment Act 1936

Subsection 23AG(2) of the Income Tax Assessment Act 1936

Paragraph 23AG(2)(a) of the Income Tax Assessment Act 1936

Paragraph 23AG(2)(b) of the Income Tax Assessment Act 1936

Paragraph 23AG(2)(c) of the Income Tax Assessment Act 1936

Paragraph 23AG(2)(d) of the Income Tax Assessment Act 1936

Section 23AG of the Income Tax Assessment Act 1936

Reasons for decision

Subsection 23AG(1) of the Income Tax Assessment Act1936 (ITAA 1936), provides that foreign earnings of an Australian resident for taxation purposes derived during a continuous period of foreign service of not less than 91 days in a foreign country are exempt from income tax in Australia.

Foreign earnings include income consisting of salary, wages, bonuses or allowances under subsection 23AG(7) of the ITAA 1936.

Paragraph 23AG(6)(b) of the ITAA 1936 provides that the period during which a person is engaged in foreign service includes any period during which the person is, in accordance with the terms and conditions of that service, absent from work because of accident or illness.

Members of the Australian organisation are entitled to leave for whatever time is necessary to recuperate from injuries sustained.

In your case, you were injured while on deployment to country X, and were on leave after your discharge from hospital. From the day of your discharge to the expected end date of your deployment, is therefore considered foreign service under paragraph 23AG(6)(b) of the ITAA 1936 as you were absent from work due to injuries sustained while on overseas deployment.

There is nothing in the legislation to preclude a general exemption under subsection 23AG(1) of the ITAA 1936 from following a specific exemption under another section of the ITAA 1936. 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 in that subsection.

One of the reasons listed is where the income is exempt in the foreign country because of a tax treaty (paragraphs 23AG(2)(a) and 23AG(2)(b) of the ITAA 1936).

There is no tax treaty between Australia and country X. Therefore, paragraphs 23AG(2)(a) and 23AG(2)(b) of the ITAA 1936 will not apply.

As the laws of country X provide for the imposition of income tax and do not generally exempt employment income from income tax, paragraphs 23AG(2)(c) and 23AG(2)(d) of the ITAA 1936 will also not apply.

None of the other reasons in subsection 23AG(2) of the ITAA 1936 apply to your situation.

You satisfy the conditions for exemption under section 23AG of the ITAA 1936 for the year included in this ruling.

Accordingly, the salary and allowances you earned from the day you were discharged from hospital to the expected end of you deployment are exempt from income tax in Australia under subsection 23AG(1) of the ITAA 1936.

Copyright notice

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).