Issue
Are the salary and wages earned after 1 July 2009 by an Australian resident taxpayer, engaged as a civilian employee of an international peacekeeping force, exempt income in Australia under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
No. The salary and wages earned after 1 July 2009 by an Australian resident taxpayer, engaged as a civilian employee of an international peacekeeping force, are not exempt income in Australia under section 23AG of the ITAA 1936.
Facts
The taxpayer is a resident of Australia for tax purposes.
The taxpayer is employed as a civilian employee of an international peacekeeping force which is located in a foreign country.
The employment is undertaken in the foreign country and the taxpayer receives salary and wages from this employment.
The taxpayer continuously worked in the foreign country for a period of 91 days or more.
The taxpayer applied for this employment directly to the international peacekeeping force and the employment contract is between the taxpayer and the international peacekeeping force.
The international peacekeeping force is an organisation tasked with observing and reporting on a peace treaty between certain countries.
Certain nations, including Australia, are a party to the international peacekeeping force and provide military contingents that make up the peacekeeping force and perform specific and specialised tasks.
Reasons for Decision
Generally, section 23AG of the ITAA 1936 provides that the foreign earnings of an Australian resident derived during a continuous period of not less than 91 days employment in a foreign country will be exempt from tax in Australia.
However, new rules apply to foreign income earned from 1 July 2009. Subsection 23AG(1AA) of the ITAA 1936 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 any of the following: (a) the delivery of Australian official development assistance by the taxpayer's employer (generally provided by AusAID or the Department of Foreign Affairs and Trade); (b) the activities of the taxpayer's employer in operating a public fund covered by the deductible gift recipient categories overseas aid fund and developed country disaster relief fund; (c) the activities of the taxpayer's employer where they are a charitable institution or religious institution which is income tax exempt because they are a prescribed institution located outside Australia or pursuing objectives principally outside Australia; (d) the taxpayer's deployment outside Australia as a member of a disciplined force of Australia (generally considered to be the Australian Defence Force or Australian Federal Police); or (e) an activity of a kind specified in the regulations.
The international peacekeeping force is not: • delivering official development assistance; • endorsed as an overseas aid fund or developing country disaster relief fund; • a prescribed institution being exempt from income tax in Australia; or • conducting an activity of a kind specified in the regulations.
In relation to the fourth condition in paragraph 23AG(1AA)(d) of the ITAA 1936, paragraph 1.31 of the Explanatory Memorandum which accompanied Tax Laws Amendment (2009 Budget Measures No. 1) Bill 2009 (which introduced the new rules) explains that a 'person's foreign earnings will be eligible for exemption if the foreign service is directly attributable to that person's deployment outside Australia as a member of a disciplined force by an Australian government, or an authority thereof.' (emphasis added)
While Australia deploys military contingents as part of its official contribution and commitment to the international peacekeeping force, in this case the taxpayer is not part of that contingent. The taxpayer obtained civilian employment directly with the international peacekeeping force and therefore this employment is not considered a deployment as a member of a disciplined force by an Australian government or authority thereof.
The taxpayer's foreign income is not attributable to any of the activities listed in subsection 23AG(1AA) of the ITAA 1936. Therefore the foreign salary and wages earned after 1 July 2009 are not exempt income under subsection 23AG of the ITAA 1936.