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Disclaimer
This edited version has been archived due to the length of time since original publication.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 written advice

Authorisation Number: 1012737449935

Ruling

Subject: Foreign income

Question

Are the salary and allowances you earned while posted overseas for full-time study exempt from income tax in Australia?

Answer

Yes

This ruling applies for the following period

Year ending 30 June 2014

Year ending 30 June 2015

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are a resident of Australia for tax purposes.

You are serving in the defence forces.

You were posted overseas.

For the duration of the posting you were not required to do any other duties.

You will receive your normal base salary.

You will also be paid an overseas living allowance, hardship allowance, and uniform allowance.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 23AG.

Income Tax Assessment Act 1997 Section 6-5

International Agreements Act

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.

A person is 'deployed' within the meaning of paragraph 23AG(1AA)(d) of the ITAA 1936 if they have been directed to perform duties overseas by the Commonwealth, a State or a Territory or an authority thereof in their capacity as a member of a disciplined force. This includes the member being sent overseas to undertake or participate in study or training activities in their capacity as a member of the relevant disciplined force.

Given a consideration of the whole arrangement, it is accepted that you meet the above criteria and the income referable to your foreign service is exempt from income tax in Australia.

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

Salary and wages are ordinary income for the purpose of subsection 6-5(2) of the ITAA 1997.


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