• Legal database
Legal database
Disclaimer
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 private advice

Authorisation Number: 1051996233505

Date of advice: 22 June 2022

Ruling

Subject: Foreign employment income exemption

Question

Is your foreign employment income exempt from income tax in Australia under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936)?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are an Australian citizen and an Australian resident for taxation purposes.

You are a member of the disciplined force.

You have been posted to foreign Country A for more than 91 days.

Your leave is restricted to that accrued during the posting and you will be taken in foreign Country A except very short trips to Australia to visit your ageing parents if travel restrictions and service commitments allow.

During your posting, in addition to your normal base salary, you receive various allowances.

You have provided documents to support that your posting falls within the scope of Australian Cooperation to foreign Country A.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 23AG

Reasons for decision

Subsection 23AG(1) of the ITAA 1936 provides that foreign earnings are exempt from income tax in Australia if all of the following requirements are satisfied:

•         You are a resident of Australia and a natural person; and

•         You are engaged in Foreign Service; and

•         The Foreign Service is for a continuous period of not less than 91 days; and

•         You derive foreign earnings from that Foreign Service.

In your case, you satisfy all of the requirements under subsection 23AG(1) of the ITAA 1936.

However, regardless of whether an individual satisfies the requirements listed above, the exemption provided by subsection 23AG(1) of the ITAA 1936 is not available unless:

  • From 1 July 2009 onwards, the foreign service is 'directly attributable' to an activity listed in subsection 23AG(1AA) of the ITAA 1936 (the listed activities include deployment outside Australia as a member of a disciplined force); and
  • The foreign earnings are exempt from taxation in the foreign country for a reason other than, or in addition to, any of the following reasons that are listed in subsection 23AG(2) of the ITAA 1936:
    • A double tax agreement or a law of the foreign country giving effort to a double tax agreement;
    • The foreign country does not impose tax on employment;
    • A law of the foreign country that corresponds to the International Organisations (Privileges and Immunities) Act 1963 or to the regulations under that Act;
    • An International agreement to which Australia is a party that deals with diplomatic or consular privileges and immunities, orprivileges and immunities for people connected with international organisations.
    • A law of the foreign country which gives effect to an agreement to which Australia is a party and which deals with diplomatic or consular privileges and immunities, orprivileges and immunities for people connected with international organisations.

In your case, you are a member of the disciplined force, you are posted to foreign Country A, you satisfy the requirement under subsection 23AG(1AA) of the ITAA 1936.

In reference to subsection 23AG(2) of the ITAA 1936, there is a double tax agreement between the Government of Australia and the Government of foreign Country A. The employment income you receive in relation to your posting is exempt in that country under the double tax agreement. Consequently, one of the reasons listed in subsection 23AG(2) of the ITAA 1936 is satisfied.

You have sent supporting documents; However, the Commissioner is not satisfied that your income is exempt in foreign Country A under any of these documents.

Your income is exempt in Country A only because of one or more of the conditions listed in subsection 23AG(2) of the ITAA 1936 (because of the double tax agreement), and is not exempt for a reason other than, or in addition to, those conditions.

Accordingly, your foreign employment income is not exempt from income tax in Australia under section 23AG of the ITAA 1936.


Back to top