ATO Interpretative Decision
ATO ID 2001/261 (Withdrawn)
Income Tax
Assessability of Papua New Guinea salary and wages derived by a residentFOI status: may be released
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This ATO ID is withdrawn from the database due to legislative changes to section 23AG of the Income Tax Assessment Act 1936 which took effect from 1 July 2009. Despite its withdrawal, this ATO ID continues to be a precedential view in respect of decisions for income years up to, and including, the 2008/2009 income year.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Are salary and wages derived in Papua New Guinea (PNG) by an Australian resident taxpayer assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. Salary and wages derived in PNG by the Australian resident taxpayer are not assessable income in Australia under section 6-5 of the ITAA 1997. The income is exempt from Australian income tax under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936).
Facts
The taxpayer is an Australian resident for taxation purposes in accordance with Australian law and for the purposes of the Double Taxation Agreement between Australia and PNG.
The taxpayer is employed in PNG for a period of 6 months. PNG income tax is withheld from salary and wages the taxpayer derives in that country.
Reasons for Decision
An Australian resident is assessable on income derived from all sources under section 6-5 of the ITAA 1997.
In accordance with paragraph 15(1) of schedule 29 of the International Tax Agreements Act 1953, PNG has the right to tax the income earned from the taxpayer's employment in that country.
However, as the taxpayer is a resident of Australia for tax purposes, the income will be assessable in Australia unless it is exempt under the ITAA 1936 or the ITAA 1997.
Subsection 23AG(1) of the ITAA 1936 exempts foreign earnings (salary, wages, commission, bonuses or allowances) derived by a resident individual taxpayer where the foreign service is for a continuous period exceeding 90 days. The exemption is subject to conditions specified in subsection 23AG(2) of the ITAA 1936.
Under subsection 23AG(7) of the ITAA 1936 foreign service means service in a foreign country as the holder of an office or in the capacity of an employee.
As the taxpayer is deriving salary and wage income, the condition of foreign service will be satisfied. The service period condition is also satisfied as the taxpayer is performing foreign service for a continuous period of six months. Conditions specified under subsection 23AG(2) of the ITAA 1936 will not apply. The salary and wage income the taxpayer derives in PNG will therefore be exempt under section 23AG of the ITAA 1936.
Date of decision: 17 July 2001
Legislative References:
Income Tax Assessment Act 1936
section 23AG
subsection 23AG(1)
subsection 23AG(2)
subsection 23AG(7)
section 6-5 International Tax Agreements Act 1953
Schedule 29 Article 15(1)
Keywords
Double tax agreements
Salary and wages income
Exempt income
International tax
Income
ISSN: 1445-2782
| Date: | Version: | |
| 17 July 2001 | Original statement | |
| You are here | 4 March 2011 | Archived |