Issue
Are the salary and wages received by the taxpayer, an ADF member from serving in Syria with Operation PALADIN as part of Australia's contribution to UNTSO, assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. The salary and wages received by the taxpayer, an ADF member from serving in Syria with Operation PALADIN as part of Australia's contribution to UNTSO, are not assessable under subsection 6-5(2) of the ITAA 1997 as the salary and wages are exempt under subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936).
Facts
The taxpayer is a resident of Australia for income tax purposes.
The taxpayer is a member of the ADF.
The taxpayer served in Syria for a continuous period of not less than 91 days as part of Operation PALADIN.
Operation PALADIN concerned the deployment of ADF members to serve in Israel, Syria, Egypt, Jordan and Lebanon as part of Australia's contribution to UNTSO.
The taxpayer receives salary and wages in relation to that service.
A certificate under paragraph 23AD(1)(a) of the ITAA 1936 has not been issued by the Chief of the Defence Force to the effect that the taxpayer is on eligible duty with a specified organisation in a specified area outside Australia.
There is no double tax agreement between Australia and Syria.
The law of Syria provides for the imposition of income tax on employment income and does not generally exempt such income from income tax.
The salary and wages received by the taxpayer are not exempt in Syria because of a law (or regulations) corresponding to the International Organizations (Privileges and Immunities) Act 1963 or under an international agreement to which Australia is a party that deals with privileges and immunities relating to diplomatic or consular matters or of persons connected with international organisations.
Reasons for Decision
Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.
Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income it is not included in assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 23AG of the ITAA 1936 which deals with overseas employment income.
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. 'Foreign service' includes service in a foreign country in the capacity as an employee and 'foreign earnings' includes income consisting of salary and wages (subsection 23AG(7) of the ITAA 1936).
Subsection 23AG(2) of the ITAA 1936 provides that the exemption in subsection 23AG(1) of the ITAA 1936 will not apply where the income is exempt from income tax in the foreign country only because of any of the following reasons: (a) a law of the foreign country giving effect to a double tax agreement (b) a double tax agreement (c) provisions of a law of the foreign country under which income covered by any of the following categories is generally exempt from income tax: (i) income derived in the capacity of an employee (ii) income from personal services (iii) similar income (d) the law of the foreign country does not provide for the imposition of income tax on one or more of the categories of income mentioned in paragraph (c) (e) a law of the foreign country corresponding to the International Organizations (Privileges and Immunities) Act 1963 or to the regulations under that Act (f) an international agreement to which Australia is a party and that deals with: (i) diplomatic or consular privileges and immunities (ii) privileges and immunities in relation to persons connected with international organisations (g) a law of the foreign country giving effect to an agreement covered by paragraph (f).
There is no double tax agreement between Australia and Syria. Therefore, paragraphs 23AG(2)(a) and 23AG(2)(b) of the ITAA 1936 do not apply.
Paragraphs 23AG(2)(c) and 23AG92)(d) of the ITAA 1936 do not apply as the law of Syria provides for the imposition of income tax on employment income and does not generally exempt such income from income tax.
The salary and wages received by the taxpayer were not exempt in Syria because of a law (or regulations) of Syria corresponding to the International Organizations (Privileges and Immunities) Act 1963 and as such paragraph 23AG(2)(e) of the ITAA 1936 does not apply.
Paragraphs 23AG(2)(f) and 23AG(2)(g) of the ITAA 1936 do not apply as the process by which Australia participated in UNTSO did not result in Australia becoming a party to an international agreement concerning UNTSO.
As none of the reasons listed in subsection 23AG(2) of the ITAA 1936 apply, the salary and wages received by the taxpayer are exempt from income tax under subsection 23AG(1) of the ITAA 1936 as the taxpayer has been engaged in foreign service for a continuous period of not less than 91 days.
Accordingly, the salary and wages received by the taxpayer will not be assessable income under subsection 6-5(2) of the ITAA 1997.