Publication:Sea Talk Spring 2003/East Timor Tax issues
Taxation implications for ADF members of the change in the nature of service in East Timor
By Defence Tax Management Office
Following endorsement by Treasury and the Australian Taxation Office of the declaration of non-warlike deployment signed by the Minister for Defence, section 23AD taxation exemption ceases on 18 August 2003.
Members can apply section 23AG exemption, provided all conditions of that section are met. This exemption will remain available until the implementation of a double tax agreement between Australia and East Timor, or some other change in tax administration in East Timor occurs.
The legislative intention of section 23AG is to prevent employees from being taxed twice on employment income that they derive from service overseas. Generally, employment income will be exempt in Australia if it is taxed in the foreign country, and vice versa.
Where the income is not exempt from tax in East Timor, section 23AG will apply, and members may be exempt from tax in Australia. This is presently the situation and if this changes, the Defence Tax Management Office will advise members.
Section 23AG is a personal tax exemption and it is therefore the responsibility of the member to determine whether their foreign employment income is in fact exempt. Members may choose to ignore the exemption and pay tax in Australia on their foreign employment income.
ADF members serving in East Timor at the time of the change in status of the nature of service may be eligible for an exemption under Section 23AG from the date the service was determined to be non-warlike (18 August 2003).
For more information see Defgram 317/2001-Australian Defence Force East Timor Tax Supplement-dated 15 August 2001.
The Defence Tax Management Office provides an email and telephone hotline service to assist ADF members with queries relating to this matter. Inquiries can be forwarded to: taxation.management@defence.gov.au or
call 1800 806 053 during business hours in Australia (AEST).
Useful tax information is also available via the internet at http://www.defence.gov.au/cfo/tax/
