Exempt Income - Approved overseas project in a foreign country

Is a taxpayer entitled to exemption under section 23AF of the Income Tax Assessment Act 1936 (ITAA 1936) for income received whilst working on an approved overseas project for a minimum of 91 days?

Yes. The taxpayer is entitled to exemption under section 23AF of the ITAA 1936 for income received while working on an approved overseas project.

The taxpayer is a resident of Australia for income tax purposes.

The taxpayer received approved project status from Austrade on an overseas work contract undertaken in a foreign country.

The proposed period of absence is a minimum of 91 days.

Section 23AF of the ITAA 1936 provides that income derived by a resident taxpayer from at least 91 days continuous employment on an approved overseas project is exempt from tax, provided that the taxpayer is a resident of Australia for tax purposes at the time the foreign remuneration is derived.

All income directly attributable to qualifying service by the taxpayer on an approved project (for example, salary, wages, commission, bonuses, allowances, contractual payments and payments for recreation leave entitlements which accrue during the relevant period) is eligible for the exemption.

As the taxpayer is a resident and will be employed on an approved project for a minimum of 91 days, they will be entitled to the exemption under section 23AF of the ITAA 1936. Note: Approved overseas projects income is taken into account in calculating Australian tax payable on other income derived by the taxpayer. Tax on the non-exempt income is calculated by applying a notional average rate of tax payable on the sum of the exempt and non-exempt income.