Edited version of private advice

Authorisation Number: 1052185208715

Date of advice: 07 November 2023

Ruling

Subject: Exempt income

Question 1

Is your employment income, derived in a foreign country, as an Australian employee exempt from income tax in Australia under section 23AD of the Income Tax Assessment Act 1936?

Answer

No.

Question 2

Is your employment income, derived in a foreign country, as an Australian employee exempt from income tax in Australia under section 23AG of the Income Tax Assessment Act 1936?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

XX XX XXXX

Relevant facts and circumstances

You are a resident of Australia for taxation purposes.

You are member of a disciplined force.

You were seconded to another government agency for a period.

You were deployed overseas via that government agency to Country A.

You were deployed to Country A for a continuous period of not less than 91 days.

Your income statements show no reference to being overseas or residing outside of Australia.

You were paid salary and allowances for your foreign service.

You deploy from Country A to Country B over the period of your posting and receive no additional allowances or tax-exempt status from either government agency.

There is no double tax agreement between Australia and Country A or Country B.

The taxation laws of Country A do not provide for the imposition of income tax on employment income.

You have not been supplied with a certificate in writing to the effect that you are on eligible duty with a specified organisation in a specified area outside Australia.

You have not been deployed as a force assigned member.

You maintain your primary residence in Australia.

You will be returning to Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 23AD

Income Tax Assessment Act 1936 section 23AG

Reasons for decision

Exempt income under section 23AD of the Income Tax Assessment Act 1936

This legislation outlines the exemption of pay and allowances of Defence Force members performing certain overseas duty. The pay and allowances earned by a person serving as a member of the Defence Force are exempt from tax if:

•         they are earned while there is in force a certificate in writing issued by the Chief of the Defence Force to the effect that the person is on eligible duty with a specified organisation in a specified area outside Australia; and

•         the eligible duty is not as, or under, an attaché at an Australian embassy or legation.

You have not indicated that you have received a certificate in writing issued by the Chief of the Defence Force to the effect that you are on eligible duty with a specified organisation in a specified area outside Australia and therefore you do not meet the conditions of section 23AD.

Exempt income under section 23AG of the Income Tax Assessment Act 1936

This legislation outlines the exemption of income earned in overseas employment. Where a resident has been engaged in foreign service for a continuous period of not less than 91 days, any foreign earnings derived by the person from that foreign service are exempt from tax.

However, those foreign earnings are not exempt from tax under this section unless the continuous period of foreign service is directly attributable to any of the following:

•         the delivery of Australian official development assistance by the person's employer (except if that employer is an Australian government agency).

•         "Australian government agency" means the Commonwealth, a State or a Territory, or an authority of the Commonwealth or of a State or a Territory. As you are both employed by and representing an Australian government agency while overseas you do not meet this condition.

•         the activities of the person's employer in operating a public fund that is covered by item 9.1.1 or 9.1.2 of the table in subsection 30-80(1) of the Income Tax Assessment Act 1997 (international affairs deductible gift recipients); and meets the special conditions mentioned in that item.

This condition is not relevant to your circumstances.

•         the activities of the person's employer, if the employer is exempt from income tax because of paragraph 50-50(1)(c) or (d) of the Income Tax Assessment Act 1997 (prescribed institutions located or pursuing objectives outside Australia).

This condition is not relevant to your circumstances.

•         the person's deployment outside Australia as a member of a disciplined force by the Commonwealth, a State, or a Territory; or an authority of the Commonwealth, a State, or a Territory.

Based on the information you have provided your deployment was not directly attributable to income earnt as a member of a disciplined force but rather as a representative of a government agency and therefore you no not meet this condition.

•         an activity of a kind specified in the regulations.

This condition is not relevant to your circumstances.

Second to the above conditions an amount of foreign earnings derived in a foreign country is not exempt from tax under this section if the amount is exempt from income tax in the foreign country only because of any of the following:

•         a law of the foreign country giving effect to a double tax agreement.

•         a double tax agreement.

•         provisions of a law of the foreign country under which income covered by any of the following categories is generally exempt from income tax:

•         income derived in the capacity of an employee.

•         income from personal services.

•         similar income.

•         the law of the foreign country does not provide for the imposition of income tax on one or more of the categories of income mentioned in the above paragraph.

•         a law of the foreign country corresponding 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 and that deals with:

•         diplomatic or consular privileges and immunities; or

•         privileges and immunities in relation to persons connected with international organisations.

•         a law of the foreign country giving effect to an agreement.

Country A does not levy a tax on the personal income of their tax residents, which would fall under the third provision listed and therefore you do not meet the conditions of section 23AG.