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Edited version of your written advice
Authorisation Number: 1012739080838
Date of advice: 4 December 2014
Ruling
Subject: foreign source income on deployment
Question
Are the salary and allowances you earned while posted to Indonesia for full-time study exempt from income tax in Australia?
Answer
Yes
This ruling applies for the following period
Year ending 30 June 201X
Year ending 30 June 201X
Relevant facts and circumstances
You are a resident of Australia for tax purposes.
You are serving in the Australian Defence Forces.
You were posted overseas
For the duration of the posting you were not required to do any other duties.
You are not a member of the Australian Embassy; you do not have a diplomatic passport or receive diplomatic privileges.
You will receive your normal base salary.
You will also be paid allowances.
There is a tax treaty between Australia and Country A.
You state that there is a Development Cooperation Agreement between Australian and country A.
Article XI states the income tax liability of Australian firms and Australian personnel shall be borne by the Government of the Republic of Indonesia.
Relevant legislative provisions
Income Tax Assessment Act 1936 section 23AG.
Income Tax Assessment Act 1997 section 6-5
International Agreements Act
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:
● you are a resident of Australia and a natural person,
● you are engaged in foreign service,
● the foreign service is for a continuous period of at least 91 days,
● you derive foreign earnings from that foreign service,
● the foreign service is directly attributable to an activity that is listed in subsection 23AG(1AA) of the ITAA 1936, and
● the foreign earnings are not exempt from income tax in the foreign country only because of one of the reasons listed in subsection 23AG(2) of the ITAA 1936.
A person is 'deployed' within the meaning of paragraph 23AG(1AA)(d) of the ITAA 1936 if they have been directed to perform duties overseas by the Commonwealth, a State or a Territory or an authority thereof in their capacity as a member of a disciplined force. This includes the member being sent overseas to undertake or participate in study or training activities in their capacity as a member of the relevant disciplined force.
Given a consideration of the whole arrangement, it is accepted that you meet the above criteria and the income referable to your foreign service is exempt from income tax in Australia.
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