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Edited version of your written advice
Authorisation Number: 1012840480235
Date of advice: 17 July 2015
Ruling
Subject: Foreign source income
Question and Answer
Are the salary and allowances you receive while employed overseas exempt from income tax in Australia?
Yes.
This ruling applies for the following period(s)
April 2015 to June 2016
The scheme commences on
April 2015
Relevant facts and circumstances
You are an Australian resident for income tax purposes.
You have recently signed a contract to work overseas.
The employment is on an overseas development assistance project in a foreign country for a continuous period greater than 91 days.
You are posted to a foreign country, for a resident position to June 2016.
Your employer is contracted to a specific Department to undertake this overseas development assistance project in a foreign country.
You have supplied a letter from your employer, stating that they employ you under contract with Department. This is an Official Development Assistance (ODA) investment by the Government of Australia in a foreign country.
You have provided copies of parts of the Memorandum of Understanding for Development Cooperation between Australia and a foreign country (MoU) that exempts the income from taxation in a foreign country.
Your employer does not currently withhold income tax from the salary payments made to you.
The Government of a foreign country normally taxes salary and wage income earned in that country.
There is no taxation treaty between Australia and a foreign country.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 23AG
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 6-15
Income Tax Assessment Act 1997 Section 11-15
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 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
• 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.
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.