Update of Tax Act Amendment – ATO Interpretative Decision 2010/165 - Section 23AG Australian Taxation Exemption

On 24 September 2010, the ATO released ATO Interpretative Decision (ATO ID) 2010/165 in relation to Defence’s request for consideration as to whether Defence APS employees are to be considered as members of a ‘disciplined force’ for the purposes of section 23AG of the Income Tax Assessment Act 1936 while supporting ADF deployments.

The ATO decision provides a positive outcome for some Defence APS employees. The following criteria for Defence APS employees apply to the ATO ID:

a. must be employees of the Department of Defence (engaged under the Public Service Act 1999),

b. must have received deployment orders from the Commonwealth for the purpose of performing operational support roles in a specified area outside Australia in support of Defence operations,

c. are subject to ADF command and control for the duration of the deployment,

d. must have consented themselves, in writing, to Defence Force discipline during the deployment and had the status of a ‘defence civilian’ under the Defence Force Discipline Act 1982,

e. are paid salary and operational support allowance by Defence for the duration of the deployment, and

f. performed foreign service on or after 1 July 2009.

This ATO ID limits the application to warlike and non-warlike operations as operational support allowance is not paid for peacetime service. It also provides the retrospective application to the date that section 23AG was originally narrowed (1 July 2009). It thus provides an avenue for Defence APS employees who have provided overseas operational support over the last 15 months, and have paid Australian taxation, to request a re-assessment from the ATO in order to claim a tax exemption.

Matters Outstanding

The table below indicates where a tax exemption may apply if all criteria (as required by the ATO) are met.

It is imperative that all groups ensure their members who are working overseas are fully informed on the tax framework that applies to their service. Given the complexity of taxation law and noting that Defence does not provide personal taxation advice, all personnel should be encouraged to seek independent professional financial advice.

Conservative judgement by employees on whether to continue PAYG tax instalments whilst overseas should ensure that employees avoid a potentially large debt to the ATO on their return to Australia.

Summary of Confirmed and Unresolved Tax Exemptions

Type of Service	Location/Country	Exemption Applies Yes – ü No - X Unresolved - ?
		ADF s23AD	ADF s23AG[1]	APS s23AG
Warlike Service	Afghanistan	ü	X	ü
	Iraq	ü	X	ü
	Pakistan	ü	X	ü
	UAE	ü	X	ü
	Kuwait	ü	X	X
	Bahrain	ü	X	X
	Qatar	ü	X	X
	Persian Gulf	ü	X	X
Non-warlike Service		ADF s23AD	ADF s23AG	APS s23AG
	Afghanistan *	X	ü	ü
	Iraq *	X	ü	ü
	Pakistan *	X	ü	ü
	UAE *	X	ü	ü
	Kuwait *	X	X	X
	Bahrain *	X	X	X
	Qatar *	X	X	X
	Persian Gulf *	X	X	X
	East Timor	X	ü	ü
	Solomon Islands	X	ü	ü
	Sudan	X	ü	ü
	* - There are currently no non-warlike operations in these locations
Peacetime Service		ADF s23AD	ADF s23AG	APS s23AG
	Op PAK AST II[2]	X	ü	x
	East Timor[3]	X	ü	x
	MSA[4] South Pacific	X	ü	x
	Defence Advisers[5]	X	X	X
	PNG	X	?	x

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[1] Section 23AG only applies in certain countries and after serving for a minimum of 91 days

[2] only applicable after serving for a minimum of 91 days

[3] Includes Defence Cooperation Program, Operation TOWER, no diplomatic personnel on long-term posting

[4] Maritime Surveillance Advisers

[5] Includes all Diplomatically accredited personnel

Related Information

· Australian Taxation Office – advice for ADF members

· ADF & APS Pay and conditions homepage

Last updated: 13 May 2011