Approved Overseas Project - Continuous period of qualifying service

Is remuneration in respect of the taxpayer's work on an approved overseas project exempt from Australian tax under section 23AF of the Income Tax Assessment Act 1936 (ITAA1936)?

No. The remuneration in respect of the taxpayer's work on an approved overseas project is not exempt from Australian tax under section 23AF of the ITAA 1936 as the taxpayer did not meet the 91 days continuous service requirement set out in subsection 23AF(1) of the ITAA 1936.

The taxpayer spent a total of 104 days in a foreign country (including travel time), in 6 separate visits, over a 339 day period.

A further 4 days was spent on approved leave.

While in the foreign country, the taxpayer was performing personal services with regard to a project which was an 'approved project' for the purposes of section 23AF of the ITAA 1936.

During the intervening periods the taxpayer was in Australia.

The longest continuous period where the taxpayer was present in the foreign country, including travel between Australia and that country, was 32 days.

For an exemption under section 23AF of the ITAA 1936 to apply, a taxpayer must be engaged in a continuous period of qualifying service of not less than 91 days, as required by subsection 23AF(1) of the ITAA 1936.

Subsection 23AF(3) of the ITAA 1936 provides that qualifying service includes time spent outside Australia working on the project, reasonable travel time between Australia and the project, absences due to accident or illness while engaged on qualifying service, and time spent on leave which accrued during the qualifying service.

In this case there were 6 periods of qualifying service and the longest continuous period of service was 32 days.

Where there is an intervening period or periods spent in Australia between separate periods of qualifying service, and the total of the intervening periods does not exceed one sixth of the total of the periods of qualifying service on the project, then under subsection 23AF(8) of the ITAA 1936, the separate periods of qualifying service shall together be taken to constitute a continuous period of qualifying service.

The taxpayer had 5 intervening periods which amounted to a total of 231 days. This exceeded one sixth of the 108 days qualifying service.

The 6 periods of qualifying service cannot therefore be regarded as a continuous period.

The taxpayer does not meet the 91 days continuous service requirement under subsection 23AF(1) of the ITAA 1936. The taxpayer is not eligible for an exemption under section 23AF of the ITAA 1936.

Date of amendment Part Comment 7 March 2014 Legislative References Correcting an error in citing the relevant legislative references.

Date of amendment | Part | Comment

7 March 2014 | Legislative References | Correcting an error in citing the relevant legislative references.