Edited version of private advice

Authorisation Number: 1052239558444

Date of advice: 8 April 2024

Ruling

Subject: Assessable income - exempt foreign income

Question

Is your income, allowances, and penalties exempt from income tax under section 23AG of the Income Tax Assessment Act 1936?

Answer

Yes. Based on the information provided to the Commissioner your income, allowances and penalties are exempt from tax.

Under the provisions of section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936), foreign earnings derived by an individual who is a resident of Australia for taxation purposes are exempt from income tax in Australia provided certain conditions are met. These conditions include:

•         there must be a continuous period of foreign service of not less than 91 days, and

•         that continuous period of foreign service must be directly attributable to, amongst other things, deployment outside Australia as a member of a disciplined force by the Commonwealth, or an authority of the Commonwealth (paragraph 23AG(1AA)(d) of the ITAA 1936).

However, even though the above conditions may be met, section 23AG of the ITAA 1936 also provides that no exemption is available 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,

•         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, or

•         a law or international agreement dealing with privileges and immunities of diplomats or consuls or of persons connected with international organisations applies.

In your case, you are a member of a relevant organisation.

You were deployed overseas for more than 91 days.

Further, there is no tax treaty between Australia and Country Z and the laws of Country Z provide for the imposition of income tax and do not generally exempt employment income from income tax. Furthermore, as you do not have any diplomatic status or privileges, no law or international agreement dealing with privileges and immunities of diplomats or consuls or of persons connected with international organisations applies to you.

Therefore, your income, allowances and penalties derived while deployed overseas are exempt from tax in Australia.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are an Australian resident for taxation purposes.

You are employed by Employer Z.

In a previous year, you were deployed by Employer Z to a deployment location outside of Australia.

The deployment location was Country Z.

Your deployment was for more than 91 days.

During your deployment in Country Z, you continued to be paid by Employer Z in Australian dollars deposited directly into your Australian bank account.

The laws of Country Z provide for the imposition of income tax and do not generally exempt employment income from income tax.

There is no tax treaty between Australia and Country Z.

You are not attached to the Australian High Commission and do not have any diplomatic status or privileges.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 23AG

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).