This TD, released on Wed 27.6.2012, provides the Commissioner’s views on the types of temporary absences from foreign service, which would form part of a continuous period of foreign service under s 23AG of the ITAA 1936.
Broadly, the TD provides that certain temporary absences that are related to the foreign service will not be taken to constitute a break in the period of foreign service. This includes:
- absences permitted by the employer and in accordance with the terms and conditions of that foreign service;
- recreation leave on full pay this is attributable to the period of foreign service;
- accident or illness of the taxpayer;
- accident or illness of a person other than the taxpayer, including the death of another person; or
- work-related trips in the course of carrying out either duties or training as required by the employer under a continuing foreign service engagement.
Further, the TD indicates that the foreign earnings must be derived from foreign service for the exemption in s 23AG to apply. It says this requirement is not satisfied by merely showing that income was received in a period during which a person is engaged in foreign service, or treated as being engaged in foreign service. The TD says the test for the s 23AG exemption requires the foreign earning to be attributable to the service in a foreign country.
The TD includes 13 examples to illustrate concepts such as recreational leave attributable to foreign service, shorter working days, cyclical arrangements, situations involving sick leave and accidents or illnesses, work-related absences, and the 1/6 legislative rule. It was previously issued as Draft Taxation Determination TD 2011/D12 and contains changes.
As a result of this TD being issued, the ATO has withdrawn Taxation Ruling TR 96/15 (Foreign tax credit system: issues relating to the practical application of s 23AG) with effect from Wed 27.6.2012. However the ATO says the TR continues to apply to arrangements which begun to be carried out before the withdrawal.
DATE OF EFFECT: Applies both before and after its date of issue.
[LTN 122, 27/6]