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Edited version of your written advice
Authorisation Number: 1012811826634
Ruling
Subject: Foreign earnings
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)?
Yes.
This ruling applies for the following periods:
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
The scheme commenced on:
12 January 2015
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You are an Australian resident for income tax purposes.
You are a member of a discipline force.
Your posting is for more than 91 days.
You are covered by the SOFA between the Australia and the overseas 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) 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:
• Delivery of Australian official development assistance by your employer.
• Activities of your employer in operating a public fund declared by the Treasurer to be a developing country relief fund, or a public fund established and maintained to provide monetary relief to people in a developing foreign country that has experienced a disaster (a public disaster relief fund).
• Activities of your employer as a prescribed charitable or religious institution exempt from Australian income tax because it is located outside Australia or the institution is pursuing objectives outside Australia.
• Deployment outside Australia by an Australian government (or an authority thereof) as a member of a disciplined force.
You are a member of a discipline force.
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:
• a tax treaty or a law of a country that gives effect to such an agreement (paragraphs 23AG(2)(a) and (b) of the ITAA 1936);
• the law of a foreign country 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 (d) of the ITAA 1936), or
• a law or international agreement dealing with privileges and immunities of diplomats or consuls or of persons connected with international organisations applies (paragraphs 23AG(2)(e), (f) and (g) of the ITAA 1936).
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 overseas country only because of one of the reasons listed in subsection 23AG(2) of the ITAA 1936.
You are covered by an agreement between Australian and the overseas country that is not listed.
Accordingly, the salary and allowances you receive during your employment overseas are exempt from income tax in Australia under subsection 23AG(1) of the ITAA 1936.
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