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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1012579510882

Ruling

Subject: Exempt foreign earnings

Question

Are your foreign earnings derived from a period of sick leave resulting from an illness that occurred while deployed overseas as a member of a disciplined force, exempt from income tax?

Answer

No

This ruling applies for the following periods

Year ending 30 June 2014

The scheme commences on

1 July 2013

Relevant facts and circumstances

You were deployed with a disciplined force to an overseas country.

Your deployment was for more than 91 days.

You became ill while on deployment and returned to Australia on paid sick leave.

You were deployed under Determination xx with the disciplined force. This determination does not accrue sick leave.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 23AG

Income Tax Assessment Act 1936 Subsection 23AG(1)

Income Tax Assessment Act 1936 Subsection 23AG(1AA)

Income Tax Assessment Act 1936 Subsection 23AG(2)

Income Tax Assessment Act 1936 Subsection 23AG(6)

Reasons for decision

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.

Subsection 23AG(6) goes on to advise that a period which a person is engaged in foreign service includes any period during which the person is, in accordance with the terms and conditions of that service:

    (a) absent on recreational leave other than :

      (i) leave wholly or partly attributable to to a period of service or employment other than that foreign service;

      (ii) long service leave, furlough, extended leave or leave of a similar kind (however described);

      (iii) leave without pay or reduced pay; or

    (b) absent from work because of accident or illness.

In your case, you were deployed overseas as part of a disciplined force under Determination xx. The terms and conditions of Determination xx do not allow for sick leave. So although you were on sick leave, you were not absent from work in accordance with the terms and conditions associated with the determination under which you were deployed. Accordingly, your income from a period of sick leave taken while you are in Australia would not be covered by subsection 23AG(6) of the ITAA 1936.

Tax Determination 2013/18

TD 2013/18 considers the assessability of foreign earnings derived by Australian Defence Force (ADF) members from a period of leave as a result of an accident or illness that occurred while deployed overseas as a member of a disciplined force.

This TD is specific to ADF members and includes sick leave.

In your case, you were deployed under Determination xx which does not allow for sick leave. Accordingly, your circumstances can be distinguished from TD 2013/18 as ADF members accrued sick leave as part of their deployment where as your deployment under Determination xx did not allow for sick leave to be accrued.

Conclusion

Your income for the period you have been on leave relating to your illness is not exempt under section 23AG of the ITAA 1936.


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