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Division 3: During deployment – taxation

Note: This Division is designed to give an overview of the taxation implications of service on a deployment. It does not try to deal with members' individual tax liability. Members should seek independent tax advice, taking account of relevant tax law and rulings.

See: Tax alerts

17.5B.17 Overview

  1. A member's ADF salary and salary-related allowances are exempt from income tax while on warlike service.

  2. This exemption only applies to taxable income from ADF sources during deployed service, ie ADF salary and allowances earned for service in the operational area. Other sources of income are not covered by this exemption.

17.5B.19 Eligibility

  1. An assignment procedure must be completed to ensure that only those members who have been assigned for eligible service with a specified organisation in the specified area receive the taxation exemptions.

  2. See: Part 1, Overview

  3. Defence Attachés are not eligible for this exemption.

17.5B.20 Leave

  1. Tax exemption continues during accrued leave, but only if the member has qualified for the exemption.

  2. Leave must be accrued in the operational area to be tax exempt. Like the normal calculation for leave, two days instead of weekends are added for each five days of leave.

  3. The leave may be taken at any time and be tax exempt. This includes after the member has returned from the deployment.

17.5B.21 Fringe Benefits Tax (FBT)

  1. For the period that a member earns exempt income, any benefits received by the member that were directly related to the warlike service are not subject to fringe benefits tax. However, benefits received by the member irrespective of the warlike service continue to be subject to FBT. Defence pays the FBT.

  2. Example: Ongoing benefits such as loan subsidies, Higher Education Contribution Scheme payments etc, continue to be subject to FBT, while benefits directly related to the warlike service, such as meals and certain annual leave travel would not be subject to FBT.

  3. Since 1999-2000, all employers (including Defence) are required to report the 'grossed up taxable value' of fringe benefits on all employees' payment summaries if the total taxable value of fringe benefits in a FBT year (1 April to 31 March) is more than AUD 1,000.

  4. If a member considers that the 'reportable fringe benefits amount' on their annual payment summary (formerly called group certificate) was incorrectly reported, they should contact the Defence Tax Management Office.

  5. See: Tax alerts Division 1, Defence Tax Management Office

Application to Reservists: Yes, on continuous full-time service.



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