Income tax: a taxpayer earns income to which Australia has no taxing right because of a Double Tax Agreement (DTA). This income is also exempt from tax under sections 23AF or 23AG of the Income Tax Assessment Act 1936 . Is this income included in the 'exempt amount' for the purpose of the exemption with progression calculations in those sections?

No. The references in subsections 23AF(17A) and 23AG(3) to 'an amount that is exempt from tax under this section' apply in respect of income that only qualifies for exemption from tax in Australia because of section 23AF or 23AG respectively, and not for any other reason. Examples An Australian resident renders service to the Swedish Government. The service is performed in Sweden. The service constitutes 'foreign service for a continuous period of not less than 91 days' as required by subsection 23AG(1). Article 19 of the Sweden/Australia Double Tax Agreement provides that any remuneration paid by Sweden in respect of this service shall be taxable only in Sweden. Regardless of the fact that this income may meet all the criteria for exemption from Australian tax under section 23AG, it will not be taken into account as an exempt amount for the purposes of the calculation in subsection 23AG(3). This is because Australia is not permitted to tax the income by the provisions of the Double Tax Agreement. An Australian resident gains employment as an accountant with a United Kingdom resident company. The employment is performed in the United Kingdom. Article 12 of the United Kingdom/Australia Double Tax Agreement provides that income in respect of this employment may be taxed in the United Kingdom. No provision of the Double Tax Agreement states that Australia may not tax the income. Assuming the income from this service meets all the requirements for exemption from tax in Australia under section 23AG, and is not exempt for any other reason, the income received will be treated as an 'exempt amount' under subsection 23AG(3).