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Edited version of private advice
Authorisation Number: 1051570873652
Date of advice: 26 August 2019
Ruling
Subject: International foreign income
Question
Is your foreign employment income whilst posted to Country A exempt from taxation in Australia under section 23AG of the Income Tax Assessment Act 1936?
Answer
Yes.
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.
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.
This ruling applies for the following period:
Year ending 30 June 2020
The scheme commenced on:
1 July 2019
Relevant facts and circumstances
You are an Australian resident for tax purposes.
You are posted to Country A on a fulltime assignment from 1 July 20XX until 30 June 20YY as you have entered into a contract to provide program management services to assist with the delivery of a program in Country A.
The program that you are working on has been extended to early in 20XX, and as such, your contract has also been extended to this time. The conditions of your contract remain unchanged.
While posted you are not a member of a diplomatic mission, covered by the Vienna Convention or any other similar agreement Australia has entered into regarding diplomatic, consular or other protection.
The program which employs you is an infrastructure development program funded through a Direct Funding Arrangement between the Governments of Australia and Country A. You are therefore working on an Australian Official Development Assistance Program whilst you are working in Country A.
A Memorandum of Understanding (MOU) between the Government of Australia (GOA) and Government of Country A (GOCA) has been negotiated. Under this MOU paragraph A allows these governments to enter into Subsidiary Arrangements for the purpose of carrying out specific activities.
A Specific Arrangement has been negotiated between GOA and GOCA relating to the Australia Assists Program and you have been employed under this program. The Specific Arrangement states that GOCA will "exempt technical specialists from income taxes in respect of income, living and accommodation allowances provided by the Program".
There is no double tax agreement between the Governments of Australia and Country A nor is there any agreement between the two countries that exempts your employment income from being assessable in Country A.
Country A normally does not tax income derived in the capacity of an employee and the local Customs and Taxation Department has no legislation relating to the taxation of income.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 23AG.
Income Tax Assessment Act 1997 Subsection 6-15(2).
Income Tax Assessment Act 1997 Subsection 6-5(2)
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