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Edited version of your written advice
Authorisation Number: 1012986808311
Date of advice: 18 March 2016
Ruling
Subject: Income 23AG
Question and answer:
Are the salary and hardship allowances paid to you during your positing to Country A exempt from taxation in Australia under the provisions of section 23AG of the Income Tax Assessment Act 1936.
Yes.
This ruling applies for the following period:
On or after 1 January 2014 to 23 July 2014.
The scheme commenced on:
On or after 1 January 2014.
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 a resident of Australia for taxation purposes.
You were posted to Country A for a continuous period of six months to work on an Australian Official Development Assistance (ODA) program fully funded through the Australian government overseas aid program administered by the Department of Foreign Affairs and Trade.
Your foreign service in Country A was directly attributable to the delivery of Australia ODA.
You took leave during your posting to Country A, all of which was leave that accrued during your positing.
During your posting to Country A you received your normally salary and a hardship allowance.
The salary and hardship allowance paid to you during your posting to Country A constitute foreign earnings for the purposes of section 23AG of the Income Tax Assessment Act 1936.
The law of Country A provides for the imposition of income tax on residents and non-residents of Country A.
The salary and hardship allowance you were paid during your posting to Country A were exempt from taxation in Country A under the provisions of:
• Article 19 of the Agreement between Australia and Country A for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, and
• Annex 12 of the Treaty on Development Co-operation between the Government of Australia and the government of Country A.
Relevant legislative provisions:
Income Tax Assessment Act 1963 Section 23AG
Reasons for decision
Exemption from taxation under section 23AG of the Income Tax Assessment Act 1936
Subsection 23AG(1) of the ITAA 1936 provides that foreign earnings are exempt from income tax in Australia 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.
• From 1 July 2009 onwards, the foreign service is directly attributable to an activity that is listed in subsection 23AG(1AA) of the ITAA 1936 (the listed activities include the delivery of Australian ODA by your employer).
• The foreign earnings must not be covered by subsection 23AG(2) of the ITAA 1936, the provisions of which make certain foreign earnings not exempt under section 23AG of the ITAA 1936.
Based on the facts you have provided, it is accepted that you meet the criteria for the exemption under section 23AG of the ITAA 1936 to apply to make the salary and hardship allowances paid to you during your positing to Country A exempt from taxation in Australia.
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