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This edited version has been archived due to the length of time since original publication.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.

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Edited version of your private ruling

Authorisation Number: 1012567054539

Ruling

Subject: Foreign Income

Question and answer

Are the salary and allowances you earned while employed overseas exempt from income tax in Australia?

No.

This ruling applies for the following period:

Year ending 30 June 2014

The scheme commences on:

1 July 2013

Relevant facts and circumstances

You are an Australian resident for income tax purposes.

Your foreign service is directly attributable to the delivery of Australian official development assistance by your employer.

You will be engaged in foreign employment for more than 91 continuous days.

There is no agreement between Australia and the overseas country that exempts the income from taxation in the overseas country.

There is no taxation treaty between the Australian Government and the overseas country.

Your foreign earnings derived from service in the foreign country are exempt from income tax in the foreign country under the Privileges and Immunities Act under the Laws of that country.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 23AG

Income Tax Assessment Act 1936 Section 23AG(1)

Income Tax Assessment Act 1936 Section 23AG(1AA)

Income Tax Assessment Act 1936 Section 23AG(2)

Reasons for decision

Subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that foreign earnings are exempt from income tax where all of the following requirements are satisfied:

An amount of foreign earnings derived in a foreign country is not exempt from tax under subsection 23AG(2) of the ITAA 1936 if the amount is exempt from income tax in the foreign country only because one or more of the following:

In your case, you are:

Accordingly, you meet the conditions for the tax exemption under subsection 23AG(1) and subsection 23AG(1AA) of the ITAA 1936 to apply to the foreign earnings you will earn from your assignment.

However, even though the above conditions may be met, subsection 23AG(2) of the ITAA 1936 also provides that no tax exemption is available in circumstances where an amount of foreign earnings derived from service in a foreign country is exempt from tax in the foreign country solely because of:

Therefore, as your foreign earnings that are derived from service in a foreign country are exempt from tax in the foreign country solely because of a law of the foreign country that relates to diplomatic or consular privileges and immunities, or privileges and immunities for people connected with international organisations, you meet the conditions under subsection 23AG(2) of the ITAA 1936.

Thus, given a consideration of the whole arrangement, as there is no memorandum of understanding between Australia and the foreign country specifically relating to income tax and you meet the criteria of 23AG(2) of the ITAA 1936 as stated above, the income earned from your foreign service is not exempt from income tax in Australia.

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