ATO Interpretative Decision
ATO ID 2010/79 (Withdrawn)
Income Tax
Overseas employment exemption: employees engaged by a company which provides support services to the AFP, other Australian Government agency employees and other personnel deployed in the RAMSIFOI status: may be released
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This ATO ID was withdrawn on 7 September 2011 for review purposes following the withdrawal of ATO ID 2010/136. A replacement ATO ID is in the course of preparation.
The issues discussed in this ATO ID are now covered in TR 2013/D3.
This document has changed over time. View its history.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Are employees engaged in foreign service for an employer contracted to provide support services to Australian Federal Police (AFP) personnel, other Australian Government agency employees and other personnel deployed as part of the Regional Assistance Mission to the Solomon Islands (RAMSI), entitled to claim an exemption for the foreign earnings derived from this foreign service pursuant to paragraph 23AG(1AA)(a) of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
No, employees engaged in such foreign service are not entitled to claim an exemption for the foreign earnings derived from this foreign service pursuant to paragraph 23AG(1AA)(a) of the ITAA 1936.
Facts
RAMSI is an Australian Government initiative that is intended to strengthen the Solomon Island's law and justice system by improving its capacity to provide timely, affordable and equitable access to justice. Under the program, Australia provides technical assistance (including prosecution and defence lawyers); support in the corrections system to improve both security and conditions in prisons; and funds for upgrading court and prison infrastructure.
The taxpayers are Australian residents for income tax purposes who are employed by an Australian resident service company.
The service company has been subcontracted by a head contractor to provide support services to the AFP personnel, other Australian Government agency employees and other personnel deployed as part of RAMSI.
The head contractor had entered into a contract with the Department of Defence (DoD) to provide a broad range of support services and secured the services of the service company to provide some of those services. Shortly after this DoD transferred this contract to the AFP.
Reasons for Decision
Subsection 23AG(1) of the ITAA 1936 provides that where Australian resident individuals are engaged in foreign service for a continuous period of not less than 91 days, foreign earnings derived from that foreign service are exempt from tax in Australia. However, new subsection 23AG(1AA) of the ITAA 1936, which took effect from 1 July 2009, provides that those foreign earnings will not be exempt under section 23AG of the ITAA 1936 unless the continuous period of foreign service is directly attributable to, amongst other things, the delivery of Australian official development assistance by the person's employer.
Delivery of Australian official development assistance by the person's employer
The term 'Australian official development assistance' is not defined for the purposes of section 23AG of the ITAA 1936. However, the Explanatory Memorandum (EM) which accompanied Tax Laws Amendment (2009 Budget Measures No. 1) Bill 2009) introducing paragraph 23AG(1AA)(a) of the ITAA 1936 provides guidance on the meaning of the phrase. The relevant paragraphs are below:
Australian official development assistance
1.19 Australian official development assistance (ODA) is assistance delivered through the Australian Government's overseas aid program, as administered by the Department of Foreign Affairs and Trade and/or the Australian Agency for International Development (AusAID). Australian ODA aims to reduce poverty and achieve sustainable development in developing countries, in line with Australia's national interest.
1.20 In addition to providing Australian ODA directly, AusAID also competitively contracts aid work to Australian and international entities. Thus, in practice, individuals involved in the delivery of Australian ODA can include both Australian Public Service (APS) employees and non-APS employees.
1.21 For the purposes of subsection 23AG(1AA) the delivery of Australian ODA must be undertaken by the person's employer, which includes AusAID and an entity contracted by AusAID to assist in the delivery of Australian ODA.
Example 1.1
Colin is an APS employee employed by AusAID. He is posted to the Cook Islands, for 120 continuous days, as a project advisor on an Australian ODA project aimed at improving the quality of early childhood education.
Colin's foreign service is directly attributable to the delivery of Australian ODA by his employer and his foreign earnings are therefore eligible for exemption pursuant to section 23AG, subject to the conditions contained in subsection 23AG(2).
Example 1.2
Robert is an APS employee employed by the Commonwealth Department of Climate Change. He is posted to Tokelau for 150 continuous days, to work on a project aimed at minimising the impacts of rising sea levels in Tokelau.
Robert is not an AusAID employee but the project is classified as Australian ODA by AusAID. Robert's foreign service is directly attributable to the delivery of Australian ODA by his employer and his foreign earnings are therefore eligible for exemption pursuant to section 23AG, subject to the conditions contained in subsection 23AG(2).
Example 1.3
Eli is a motor mechanic employed by Emu Engineering Pty Ltd, a private company contracted by AusAID to provide vocational training in Vanuatu. He is posted to Vanuatu for 180 continuous days.
Eli's foreign service is directly attributable to the delivery of Australian ODA by his employer and his foreign earnings are therefore eligible for exemption pursuant to section 23AG, subject to the conditions contained in subsection 23AG(2).
1.22 Foreign service directly attributable to the delivery of Australian ODA does not include diplomatic or consular duties carried out by Australian residents.
The examples in the EM reveal that paragraph 23AG(1AA)(a) is intended to restrict the section 23AG of the ITAA 1936 exemption to foreign earnings derived by:
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- Australian Public Service (APS) employees providing assistance that is classified as Australian official development assistance and is administered by AusAID or the Department of Foreign Affairs and Trade (DFAT); or
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- other employees delivering Australian official development assistance on behalf of their employers who in turn have been contracted by the Australian Government to assist in the delivery of Australian official development assistance that is administered by AusAID or DFAT.
The ordinary meaning of 'assistance' in the Macquarie Dictionary is 'the act of assisting; help; aid'. Therefore, adopting the ordinary meaning, 'assistance' for the purposes of section 23AG of the ITAA 1936 would encompass the provision of money, goods or services capable of affording help or aid.
The taxpayers are not APS employees. Nor are the taxpayers employees of employers contracted by the Australian Government to assist in the delivery of Australian official development assistance that is administered by AusAID or DFAT. Rather, the employees are providing support services on behalf of the service company (which of itself is not Australian official development assistance) to the AFP personnel, other Australian Government agency employees and other personnel deployed as part of RAMSI.
Accordingly, the employees engaged to provide the support services to the AFP personnel, other Australian Government agency employees and other personnel deployed as part of RAMSI are not entitled to claim an exemption for the foreign earnings derived from their foreign service under section 23AG of the ITAA 1936.
Date of decision: 19 March 2010Year of income: Year ended 30 June 2010
Legislative References:
Income Tax Assessment Act 1936
section 23AG
subsection 23AG(1)
subsection 23AG(1AA)
paragraph 23AG(1AA)(a)
ATO ID 2010/78
Other References:
Explanatory Memorandum to the Tax Laws Amendment (2009 Budget Measures No. 1) Bill 2009
Keywords
Exempt income
Foreign income
Income
International tax
ISSN: 1445 - 2782
| Date: | Version: | |
| 19 March 2010 | Original statement | |
| You are here | 7 September 2011 | Archived |