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This edited version has been archived due to the length of time since original publication.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

Authorisation Number: 1012792243075

Date of advice: 20 April 2015

Ruling

Subject: 23AG income

Questions and answers

Is the foreign employment income and allowances you derive from working overseas exempt income in Australia under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936)?

No.

This ruling applies for the following periods:

Year ended 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

The scheme commenced on:

1 July 2013

Relevant facts and circumstances

You are an Australian resident for income tax purposes.

You are an ongoing employee with a government department

You have been posted overseas for more than 91 days.

Your posting is in relation to the administration of official development assistance (ODA).

You travel to the overseas country on a diplomatic passport.

You do not pay tax in destination country.

Relevant legislative provisions:

Income Tax Assessment Act 1936 Subsection 23AG(1)

Income Tax Assessment Act 1936 Subsection 23AG(7)

Income Tax Assessment Act 1936 Section 23AG

Income Tax Assessment Act 1936 Subsection 23AG(2)

Reasons for decision

Subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA1936) 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 the foreign service will be exempt from tax in Australia. The term 'foreign service' means service in a foreign country as the holder of an office or in the capacity of an employee and the term 'foreign earnings' includes income consisting of salary and wages and allowances.

Subsection 23AG (1AA) of the ITAA 1936 provides that foreign earnings are not exempt from tax unless the continuous period of Foreign Service is directly attributable to any of the following:

Your employment is in relation to the delivery of ODA. You satisfy one of the conditions for exemption under subsection 23AG(1AA) 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 derived from service in a foreign country is exempt from tax in the foreign country solely because of:

In order for your employment income to be exempt from tax in Australia under section 23AG of the ITAA 1936, the income must not be exempt from tax in the overseas country only because of one of the reasons listed in subsection 23AG(2) of the ITAA 1936.

In your case, your income derived in the overseas country is only exempt from tax in the overseas country due to the fact that you are a diplomat.

Accordingly, the salary and allowances you receive during your employment in the overseas country is not exempt from income tax in Australia under subsection 23AG(1) of the ITAA 1936 and must be declared in your Australian tax return.


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