Individuals entitled to tax exemptions under 23AG legislation, could be missing out on significant funds they are entitled to, simply because of timing and a lack of information. Specialist advisors at GiffardSim Accountants have witnessed this affect Defence Force personnel particularly, and have been successful in identifying and remedying incorrect tax returns for them.

Working overseas for over 91 days could entitle you to tax-exempt income; however Certified Practicing Accountant Rob Giffard warned that if this work fell during the financial year changeover, you may have lost funds you’re entitled to. Mr Giffard of GiffardSim Accounts in Nowra on the NSW South Coast, specialist tax advisors to Defence personnel, has come across this issue in the past and has found many troops who are in line for this exemption were unaware of this particular pitfall. 

The Exempt Foreign Income legislation, called the 23AG exemption means that foreign earnings derived by an Australian resident taxpayer from at least 91 days continuous employment in a foreign country will generally be exempt. “If a soldier is posted into a country, such as East Timor, on July 1 and then 91 days later satisfies the 23AG rule, the Defence Force will then return the tax that soldier paid from July 1. Then from that point while working in the country and still satisfying the 23AG rule, the soldier pays no tax on income.” 

It seems simple enough – until you consider many of those working overseas may have begun employment or service during the previous tax year; particularly those troops being rotated regularly in East Timor or the Solomon Islands. So then, what happens when a soldier is deployed on in late May or early June and then satisfies 23AG 91 days later in the new financial year? “That’s where the issue gets a little bit tricky. The Defence Force at this point has already issued an annual payment summary for the previous financial year. They will also rebate the tax paid until the point of the current financial year only. However, it is up to the individual to chase after the other tax paid before that financial year.” 

The individual can do this by amending their previous year’s tax return if it has been lodged or by getting a declaration from Defpac stating that their issued payment summary is incorrect. “Say a soldier earns $58,000 according to their pay summary and has had $13,350 withheld, but he or she realises that of 91 days spent working overseas, 26 were in the prior financial year. Effectively that means the pay for those 26 days, say $5,600 was taxed when it should have been tax free and at that rate the soldier has overpaid around $1,680 that could be refunded.” 

“In my opinion it can be a trap and there may be some individuals out there who haven’t noticed this,” said Mr Giffard. If you believe you may be among those in this situation, or if you are part of the Defence Force and would simply like to speak with trained specialists on how you can optimise your tax and finances, please contact any of our advisors at GiffardSim Accountants on 4421 4355.