"93 Section 23AG exempts salaries from tax in Australia where they are derived by persons engaged in service in a particular foreign country and the particular foreign country is the base from which they derive those salaries. The section was not directed at exempting earnings of international airline aircrew based in Australia from tax.
94 It is fallacious to say that a person who is a resident of Australia, whose home is in Australia, whose Home Base or Preferred Port is in Australia and whose duty cycles begin and end in Australia is engaged in service in a foreign country in the capacity of an employee within the meaning of s 23AG of the 1936 Act. The section is concerned with persons who are "actually on the job" in the particular overseas country in which their foreign earnings are derived."
Overseas Aircrew Basing Limited v FCT  FCA 7 (Federal Court, Graham J, 15 January 2009).
For a copy of the decision, go here.