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Edited version of private advice
Authorisation Number: 1051972760034
Date of advice: 8 July 2022
Ruling
Subject: Exempt foreign income
Question 1
Does time spent in Australia due to a work-related injury count as continuous foreign service under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936)?
Answer
Yes.
Based on the information provided to the Commissioner the time you spent in Australia due to a work-related injury will count as continuous foreign service.
Subsection 23AG(6) of the ITAA 1936 provides that time is considered a period of foreign service where, in accordance with the terms and conditions of that service, you are absent from work because of accident or illness.
The Commissioner is satisfied that you have met this condition as your sick leave was accrued under the terms of your foreign service and recredited as part of your compensation claim.
Question 2
Are compensation payments for income lost due to injury exempt from tax under section 23AG of the ITAA 1936?
Answer
Yes.
Foreign earnings includes compensation payments received due to an accident on foreign service where the income is assessable and incidental to the foreign service.
Your accident occurred while you were on foreign service. The Comcare payments you received represent the allowances and other amounts you would have received if you had not been injured and continued your foreign service in country Y. The income is assessable and incidental to your foreign service.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You meet the requirements set out in section 23AG, including 23AG(2), of the ITAA 1936.
You were posted to Country Y as part of a disciplined force, arriving in September 20XX.
You were in Country Y for a short period when you were injured.
Under the relevant determination, you were credited with 18 days sick leave for every 12 months of foreign service. You were credited with 18 days sick leave from the commencement of your foreign service.
When your compensation claim was accepted you were re-credited with all your sick leave you had taken as part of the accident.
Your compensation payments cover the difference between the base pay you continued to receive from your employer upon returning to Australia and the higher amount you would have received if your foreign service had continued.
The leave, return to Australia for treatment, and return to work program (specifically working in Australia until able to return to duty) are all within the terms and conditions of your service.
Relevant legislative provisions
Income Tax Assessment Act 1936 section 23AG