Rwanda tax refund freeze

By CPL Cameron Jamieson

VETERANS of the UN mission in Rwanda have been placed in a taxation holding pattern following the decision of the Australian Tax Office (ATO) to review part of the tax law.

Recent tax rulings have allowed veterans of other overseas operations, such as the Peace Monitoring Group in Bougainville, to claim a refund for the income tax paid while on operations.

In the case of Rwanda, the ATO had already begun making refunds when the process was placed on hold.

As a result, the ADF had to withdraw Defgram 72/2004, which advised ADF personnel of their ability to claim exemption of income tax for their service in Rwanda.

Many Rwandan veterans have been angered by the ATO’s tax-freeze, and those who have received the $7000- plus refund have been advised they might have to pay it back.

The issue lies with the ATO’s interpretation of Section 23AG of the Income Tax Assessment Act of 1936. Under Sub-section 1, an Australian resident who has worked overseas for a continuous period exceeding 91 days may be exempt from tax.

However, in the case of the Rwandan veterans, Sub-section 2 lists a number of reasons why Sub-section 1 may not apply.

It is within Sub-section 2 that the ATO is reviewing its interpretation of the tax law. For ADF members to be exempt from tax, Australia must not be a party to an international agreement covering the privileges and immunities in relation to persons connected with international organisations, such as the UN.

Defence’s Director of Tax Management, Diva Divakaran, said that in the case of Rwanda, the only parties to the UN agreement, for the purposes of Section 23AG, were the UN and Rwanda.

“Defence considers that Australia was not a party to the agreement and believes that the tax exemption should apply to ADF personnel who served in Rwanda,” Mr Divakaran said.

“The Australian Taxation Office is reviewing this position and is seeking independent legal advice on the nature of the UN-Rwanda agreement and other similar agreements with countries such as Mozambique, Syria/Lebanon and Western Sahara. Defence is working with the ATO and will resolve the issue by July 31.”

An ATO spokesman said it was a priority issue, and that the ATO was mindful of the effect on ADF members.

The spokesman said the ATO was working with the Attorney-General’s Department and the ADF to resolve the issue as quickly as possible.

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