Edited version of private advice

Authorisation Number: 1052189721040

Date of advice: 07 November 2023

Ruling

Subject: Foreign income exemption

Question

Is income you earn during your period of foreign service exempt from taxation in Australia under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936)?

Answer

Yes.

You are a member of a disciplined force fulfilling your posting in a jurisdiction in which the provisions of section 23AG(2) of the ITAA 1936 do not apply to prevent the exemption. Your total period of foreign service is for a duration longer than 91 days and temporary absences from your period of continuous service have remained, and will remain, within legislated limits. Therefore, your period of foreign service is taken to constitute an unbroken period of foreign service in accordance with subsection 23AG(6A) of the ITAA 1936.

As your period of foreign service meets the qualifying criteria, income you received for the period you are in the foreign country will be exempt from taxation under section 23AG of the ITAA 1936. Taxation Determination

TD 2012/8 Income tax: what types of temporary absences from foreign service form part of a continuous period of foreign service under section 23AG of the Income Tax Assessment Act 1936? provides further information.

This ruling applies for the following periods:

Year ended 30 June 20xx

Year ending 30 June 20xx

The scheme commenced on:

1 July 20xx

Relevant facts and circumstances

You are a resident of Australia for taxation purposes.

You are a fulltime serving member of a disciplined force.

You were deployed to a foreign country (Country A) for a period of over 91 days.

You work out of the Australian Embassy in the foreign country.

Your role is to manage the delivery of development assistance to local security personnel.

You obtained a diplomatic passport as advised by the Australian Embassy.

Your income is not subject to taxation in Country A.

Your income is not subject to a tax treaty with Country A or a law giving effect to a treaty agreement.

Country A normally taxes income from employment.

You continue to have tax withheld from your income in Australia.

During your posting you accrue 22.5 days of basic recreational leave and 15 days of remote locality leave per year.

The amount of annual leave taken over the period of your posting will be less than the amount of leave accrued over your period of foreign service.

In your official capacity you were required to accompany a foreign dignitary from Country A to Australia for 16 days to attend official events and other appointments with your employer's Australian offices. You did not take any leave over this period.

You subsequently took 2 periods of leave.

You subsequently made a return visit to Australia and worked here in relation to your posting for a period of 2 days. You then took a period of recreational leave.

For 3 days after your recreation leave finished you worked from offices in Australia on matters pertaining to your posting.

You then returned to Country A to complete the remainder of your posting.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 23AG