Issue
Does the value for rent free accommodation in New Zealand provided by a New Zealand employer to an Australian resident taxpayer form part of foreign earnings pursuant to subsection 23AG(7) of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
No. The value for rent free accommodation in New Zealand provided by a New Zealand employer to an Australian resident taxpayer does not form part of foreign earnings pursuant to subsection 23AG(7) of the ITAA 1936.
Facts
The taxpayer is a resident of Australia for income tax purposes.
The taxpayer is employed in New Zealand by a New Zealand company for a period of eight months.
The taxpayer receives a cash salary and rent free accommodation from the employer.
For New Zealand tax purposes, a value for the rent free accommodation was included in the taxpayer's assessable income.
Reasons for Decision
Subsection 23AG(1) of the ITAA 1936 provides that where a resident taxpayer is engaged in foreign service for a continuous period of not less than 91 days, any foreign earnings derived will be exempt from tax in Australia.
Subsection 23AG(7) of the ITAA 1936 defines 'foreign earnings' to mean income consisting of earnings, salary, wages, commission, bonuses or allowances and 'foreign service' as service in a foreign country as the holder of an office or in the capacity of an employee.
Foreign earnings as defined in subsection 23AG(7) of the ITAA 1936 does not include value of accommodation.
Accordingly, the value for rent free accommodation is not foreign earnings for the purposes of subsection 23AG(7) of the ITAA 1936.
Note: To finalise the question on the assessability of the value of accommodation, the taxpayer is required to consider the double tax agreement between Australia and New Zealand.