The Australian Taxation Office (ATO) has recently released a Class Ruling (CR 2003/94) which provides members with confirmation of the taxation treatment of their earnings while serving in the Solomon Islands as part of Op Anode.

The ruling states that income and allowances received while in the Solomon Islands will be exempt from income tax under section 23AG of the Tax Act, providing the member has been engaged in the Solomon Islands for a period of 91 days or more.

In a significant win for Defence, the ruling extends the exemption to members who have served in naval vessels within the territorial waters of the Solomon Islands.

Members who meet the criteria for the exemption, and who have not already done so, should complete a declaration of Solomon Islands service and forward it to their relevant pay cell. Copies of this declaration are available from the annex to Defgram 181/2003.

Once declarations are received, pay staff will process the exempt tax transaction, which will cease withholding tax deductions from members' fortnightly pay entitlements and overpaid tax deducted in relation to Solomon Islands service performed during the 2003/2004 year will be refunded through the pay account.

Further information concerning notification and tax zone reporting procedures is contained in DEFSAAC 2003/24.

Alternatively, members may defer applying for exemption until after the deployment, in which case, the declaration should be sent direct to DEFPAC.

All declarations of Solomon Islands Service are to be forwarded to DEFPAC.

DEFPAC will provide members with details of their exempt earnings at the end of the financial year for inclusion in their 2003/04 income tax return.

• Copies of the ruling may be downloaded from the ATO's website at http://law.ato.gov.au
• Copies of the DEFGRAM may be obtained from the Defence Tax Management Office by sending an email to taxation.management@defence.gov.au or by telephoning 1800 806 053.

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