Edited version of private advice

Authorisation Number: 1051521046283

Date of advice: 22 May 2019

Ruling

Subject: International Income

Question

Is your foreign employment income whilst posted overseas exempt from taxation in Australia under section 23AG of the Income Tax Assessment Act 1936?

Answer

No

This ruling applies for the following period:

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are an Australian resident for tax purposes.

You have been posted to Country A under a contract with a company in Australia which has seconded you to a mission in Country A as an advisor. In this role you will be assisting the local government in development activities.

Your contract commenced in early 20XX and continues for more than 91 days. This contract specifies that you are an employee.

This mission is considered official development assistance by the Department of Foreign Affairs and Trade (DFAT).

Staff in your mission enjoys the same privileges and immunities as members of other missions under the Vienna Convention on Diplomatic Relations 1961 and, as a result, you are not subject to local taxation.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 23AG

Income Tax Assessment Act 1997 Subsection 6-15(2)

Income Tax Assessment Act 1997 Subsection 6-5(2)

Reasons for decision

Assessable income - general

As a general rule, and under the provisions of section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), the assessable income of an Australian resident taxpayer includes all the ordinary income they earn from all sources, in or out of Australia in an income year.

Income in the form of salary, wages and allowances are all types of ordinary income.

Although a payment may be considered ordinary income and will generally be assessable under the provisions of section 6-5 of the ITAA 1997, there are some instances where ordinary income may be excluded from an individual's assessable income in Australia. This will be the case for example if a specific provision of the tax law makes the income exempt from taxation in Australia.

Exemption from taxation under section 23AG of the Income Tax Assessment Act 1936

Section 23AG of the ITAA 1936 provides that foreign earnings are exempt from income tax in Australia 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.

·         From 1 July 20XX onwards, the foreign service is directly attributable to an activity that is listed in subsection 23AG(1AA) of the ITAA 1936 (the listed activities include the person's deployment outside of Australia as a member of a disciplined force by the Commonwealth).

·         Subsection 23AG(2) of the ITAA 1936, must not apply to the taxpayer.

From the information that you have provided, during your posting overseas you will not satisfy all of the above criteria as your exemption from local taxation is provided by the Vienna Convention on Diplomatic Relations 1961 which is an international agreement to which Australia is a party and deals with diplomatic or consular privileges and immunities. Thus, under Subsection 23AG(2), you do not qualify for an exemption.

Conclusion

As you do not satisfy the exemption conditions provided for under section 23AG of the ITAA 1936, the income that you derive from your overseas deployment is assessable in Australia under section 6-5(2) of the ITAA 1997.