ATO Interpretative Decision
ATO ID 2001/554 (Withdrawn)
Income Tax
Exempt foreign employment income - KoreaFOI status: may be released
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This Interpretative Decision has been replaced by ATO ID 2002/897 and is therefore withdrawn.This document incorporates revisions made since original publication.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Is income derived by a taxpayer who is to be temporarily employed in Korea and paid by an Australian employer, exempt from tax under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes, the overseas employment income is exempt foreign income under section 23AG of the ITAA 1997.
Facts
The taxpayer is to be employed in Korea for approximately 18 months.
Wages will continue to be paid by the taxpayer's Australian employer.
The taxpayer will be present in Korea for more than 183 days during the Korean year of income (1 January to 31 December).
The taxpayer is a resident of Australia for income tax purposes.
Reasons for Decision
Subsection 23AG(1) of the ITAA 1936 states that 'where a resident, being a natural person, has been engaged in foreign service for a continuous period of not less than 91 days, any foreign earnings derived by the person from that foreign service is exempt from tax'. This section is subject to the proviso contained in subsection 23AG(2) of the ITAA 1936, which removes the exemption for income that is treated as exempt income in the foreign country in which it is earned.
Subsection 23AG(7) of the ITAA 1936 defines 'foreign service' as service in a foreign country as the holder of an office or in the capacity of an employee, and 'foreign earnings' include salary, wages, commission, bonuses or allowances.
Article 15 of Schedule 22 to the International Tax Agreements Act 1953 provides that salary and wages derived in Korea from employment exercised may be taxed in Korea. However, this will only apply if the taxpayer is present in Korea for more than 183 days of the Korean year of income and the remuneration is paid by an Australian employer.
If the taxpayer was not present in the Korea for more than 183 days in the Korean year of income, the income derived will not be taxable in Korea but subject to tax in Australia. Consequently an exemption from tax under subsection 23AG(1) of the ITAA 1936 would not apply.
The taxpayer travelled to Korea to be temporarily employed in that country. The taxpayer was present in Korea for more than 183 days of the Korean year of income. The taxpayer's Australian employer paid the taxpayer wages while working in Korea. As the period of employment was greater than 91 days, the taxpayer's wages are exempt from tax in Australia under subsection 23AG(1) of the ITAA 1936 but are subject to tax in Korea.
Legislative References:
Income Tax Assessment Act 1936
section 23AG
Schedule 1 Article 12 Taxation Administration Act 1953
subsection 12(1) of Schedule 1
Keywords
Foreign income
Exempt income
Korea
ISSN: 1445-2782
| Date: | Version: | |
| 16 May 2001 | Original statement | |
| You are here | 11 September 2002 | Archived |