What is foreign service?

Foreign service is service in a foreign country as an employee or an office holder.

Service on a ship in international waters is not foreign service because the international waters do not form part of the territory of a foreign country.

An employee includes a person:

• employed by a government or an authority of a government
• employed by an international organisation, or
• who is a member of a disciplined force.

If you work overseas and earn fees for independent services you provide - for example, as a doctor, lawyer or architect - you are not considered to be an employee or an office holder in the foreign country.

What if your foreign service straddles income years?

Foreign service is not measured on a year of income basis. Where it straddles two income years, the entire period of that service is taken into account in applying both the:

• exempt foreign employment income provisions, and
• approved overseas projects provisions.

Any income that is subject to these provisions would still be declared in your return for the year in which you earned it.

Example

Claudia is an Australian resident who worked in England as a nanny for the period 12 April 2009 to 16 August 2010 - a continuous period of 492 days.

Prior to 1 July 2009, Claudia's foreign earnings were eligible to be exempt from tax in Australia, however from 1 July 2009 her foreign earnings were not eligible to be exempt as her foreign service was not directly attributable to a qualifying activity.

Although Claudia's period of service from 12 April 2009 to 30 June 2009 was less than 91 days, as her total period of continuous foreign service is 91 days or more, her foreign earnings from that period of service still qualifies to be exempt.

Claudia's income from her service for the period 1 July 2009 to 16 August 2010 will be taxed in Australia and she may be entitled to claim a foreign income tax offset in respect of the foreign tax paid on that income.

More information

• What are foreign earnings?
• What are tax treaties?
• Foreign income while working on an approved overseas project
• Working overseas as a member of the Australian Defence Forces or the Australian Federal Police
• Exempt foreign employment income
• Exempt foreign employment income - how it affects your tax

For assistance in applying this information to your own circumstances, phone us on 13 28 61.

Our commitment to you

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations.

If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take.

Some of the information on this website applies to a specific financial year. This is clearly marked. Make sure you have the information for the right year before making decisions based on that information.

If you feel that our information does not fully cover your circumstances, or you are unsure how it applies to you, contact us or seek professional advice.

Copyright

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products)