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Edited version of private ruling
Authorisation Number: 1011667203755
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Ruling
Subject: Foreign employment income - Country X
Is your foreign employment income assessable in Australia?
Yes.
This ruling applies for the following period
Year ending 30 June 2010
Year ending 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
The scheme commences on
1 July 2009
Relevant facts and circumstances
You are an Australian resident for income tax purposes.
You work for company in Country X.
You have worked in Country X as a supervisor since the 2009-10 income year.
You are not employed as part of an AusAID project and are not a member of the armed forces.
You are entitled to a few weeks leave for every few months worked.
You return to Australia during your leave to visit your family.
You do not pay income tax in Country X.
Relevant legislative provisions
Subsection 6-5(2) of the Income Tax Assessment Act 1997
Subsection 23AG(1) of the Income Tax Assessment Act 1936
Subsection 23AG(7) of the Income Tax Assessment Act 1936
Section 23AG of the Income Tax Assessment Act 1936
Subsection 23AG(1AA) of the Income Tax Assessment Act 1936
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australia resident for income tax purposes includes income gained from all sources, whether in or out of Australia.
Subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that where an Australian resident for tax purposes is engaged in foreign service for a continuous period of not less than 91 days, foreign earnings derived from that service will be exempt from income tax in Australia.
Foreign service includes service in a foreign country in the capacity as an employee (subsection 23AG(7) of the ITAA 1936). Foreign earnings include salary and wages income (subsection 23AG(7) of the ITAA 1936).
Section 23AG of the ITAA 1936 has been amended so that foreign employment income derived by Australian residents will only be exempt in certain circumstances. These amendments are effective from 1 July 2009.
Subsection 23AG(1AA) of the ITAA 1936 provides that foreign earnings are not exempt from tax unless the continuous period of foreign service is directly attributable to any of the following:
· the delivery of Australian official development assistance by the taxpayer's employer (generally provided by AusAID or the Department of Foreign Affairs and Trade)
· the activities of the taxpayer's employer in operating a public fund covered by the deductible gift recipient categories overseas aid fund and developed country disaster relief fund
· the activities of the taxpayer's employer where they are a charitable institution or religious institution which is income tax exempt because they are a prescribed institution located outside Australia or pursuing objectives principally outside Australia
· the taxpayer's deployment outside Australia as a member of a disciplined force of Australia (generally considered to be the Australian Defence Force or Australian Federal Police), or
· an activity of a kind specified in the regulations.
From the information provided, your employment is a private commercial contract and does not fall into one of the exemption categories listed above.
As you do not satisfy any of the conditions for exemption under subsection 23AG(1AA) of the ITAA 1936, your employment income derived from Country X is not exempt from income tax in Australia under subsection 23AG(1) of the ITAA 1936.
Consequently, your foreign employment income is assessable in Australia under subsection 6-5(2) of the ITAA 1997.
Note
This income should be included as net foreign employment income in an Australian income tax return.
This will be added to your other assessable income and you will be assessed at resident rates of income tax.
Further information on completing an income tax return and tax rates is available on the Tax Office's website.