When does a payment of foreign earnings have a foreign source?

Earnings have a foreign source where:

  • the work is performed offshore and foreign tax was paid
  • the business paying the person is located offshore
  • the work was not incidental to work performed in Australia.

Generally, earnings do not have a foreign source where an employee:

  • attends a conference
  • travels on work
  • undertakes the work as an incidental part of their Australian activities.

Example 5

Harry works for a software developer company in Australia. In May 2011, as part of a contract held by the company, Harry is required to go to New Zealand for a period of six working days to present and test some software. During these six days, Harry continues to be paid by his Australian employer. Harry's employer determines that his earnings for the six-day period would not have a foreign source. As such, Harry's employer would not be required to provide him with a PAYG payment summary - foreign employment (NAT 73297).

End of example


Example 6

Renee's Australian employer sends her to Hong Kong for two weeks to finalise an important acquisition. Whilst in Hong Kong, Renee is offered an opportunity to stay there for a further four weeks by an affiliate company. Although this work is unrelated to her duties in Australia, her Australian employer agrees to continue to pay her as it is seen to be a good opportunity to develop Renee and the relationship with the affiliate.

For the initial two-week period, Renee's employer determines that her earnings do not have a foreign source, and payments made and tax withheld will be reported on the PAYG payment summary - individual non-business (NAT 0046) form.

For the following four-week period, however, Renee's employer determines that her earnings do have a foreign source and these will need to be reported on a PAYG payment summary - foreign employment (NAT 73297).

End of example
    Last modified: 01 Dec 2015QC 22115