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ATO Interpretative Decision

ATO ID 2004/234 (Withdrawn)

Income Tax
Foreign Exchange: translation of exempt salary and wage income into Australian currency where the taxpayer has other Australian income

Attention This ATO ID has been withdrawn on the basis it is no longer required as it is a straight application of the law. Replaced by web content Exempt foreign employment income.
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 5 May 2017.

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Issue

Must an individual taxpayer who derives salary and wage income that is exempt under subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936) translate this amount into Australian currency if Australian sourced income is also derived?

Decision

Yes. An individual taxpayer who derives salary and wage income that is exempt under subsection 23AG(1) of the ITAA 1936 must translate this amount into Australian currency using Item 6 of subsection 960-50(6) of the Income Tax Assessment Act 1997 (ITAA 1997) if the individual taxpayer also derives Australian sourced income.

Facts

The taxpayer is an Australian resident who has been working in New Zealand for a New Zealand company for 12 months.

The taxpayer receives salary and wages income which is paid in New Zealand currency (NZD) into a bank account held in New Zealand.

On 1 September 2003 the taxpayer's employer deposits NZD 5,000 salary into the taxpayer's account. This income is exempt under subsection 23AG(1) of the ITAA 1936

The taxpayer derives the New Zealand salary and wage income on a cash basis.

The taxpayer also derives other income from Australian sources.

Reasons for Decision

While the taxpayer's salary and wage income is exempt income for Australian tax purposes under section 23AG of the ITAA 1936, that exempt income will still be taken into account in determining the taxpayer's other Australian tax consequences.

Here, because the taxpayer derives income from an Australian source, section 23AG(3) of the ITAA 1936 will require the Australian dollar amount of the salary and wages to be taken into account in calculating the rate of tax to apply to any assessable Australian income derived in that year.

Section 960-50 of the ITAA 1997, which applies generally from 1 July 2003, requires that an amount in a foreign currency is to be translated into Australian currency for the purpose of assessing Australian tax.

The salary and wage income is an amount of ordinary income that is to be translated into Australian currency for Australian tax purposes under subsection 960-50(1) and paragraph 960-50(2)(a) of the ITAA 1997. As the taxpayer accounts for the income derived from employment on a cash basis it is derived at the time that it is received.

In accordance with Item 6 of the table at subsection 960-50(6) of the ITAA 1997 the value of the exempt salary and wage income will be translated at the exchange rate prevailing on the date that it is received.

Therefore, an individual taxpayer who derives salary and wage income that is exempt under subsection 23AG(1) of the ITAA 1936 must translate this amount into Australian currency at the exchange rate prevailing on the date that it is received (that is, 1 September 2003) under subsection 960-50(6) of the ITAA 1997.

Note: This ATOID does not take into account regulations which in some circumstances give taxpayers a choice to use an average exchange rate when translating foreign currency amounts into Australian currency.

Date of decision: 9 February 2004

Year of income:Year ended 30 June 2004

Legislative references:
Income Tax Assessment Act 1936
   subsection 23AG(1)
   subsection 23AG(3)

Income Tax Assessment Act 1997
   subsection 960-50(6)

Related ATO Interpretative Decisions
ATO ID 2003/86

Keywords
Exempt income
Foreign income
Foreign currency translation

Siebel/TDMS reference number: 3895155; 1-9DM8W69

Business line: Small Business/Individual Taxpayers

Date of publication: 19 March 2004

ISSN: 1445-2782

ATO ID 2004/234 (Withdrawn) history   Top  
   Date   Version 
    9 February 2004   Original statement   
 You are here ®   5 May 2017   Withdrawn   


 


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