Reporting your foreign employment income
You must report all your foreign employment income in your Australian tax return – both assessable income and exempt income. You must do this even if tax was taken out in the country where you earned the income.
Foreign employment income is income earned by an Australian resident working overseas as an employee. It includes salary, wages, commissions, bonuses and allowances. It may be paid by an overseas or an Australian employer.
You may be exempt from paying tax on your foreign employment income if you're: a member of an:
- Australian defence or police force
- organisation engaged in overseas aid work.
You must still report this exempt income in your tax return.
Your Australian employer must withhold tax from non-exempt foreign employment income if they continue to pay you while you’re overseas.
If your foreign employer is not registered for Australian PAYG withholding, it's unlikely that they'll withhold any amounts for Australian tax purposes from payments to you. You'll have to report your total earnings in your Australian tax return.
Reporting foreign tax
If you’ve paid foreign tax on your overseas income and it’s not exempt foreign employment income, you add the foreign tax back to your net employment income (this is called grossing up) to determine the assessable amount.
Include the income in your tax return as 'Assessable foreign income'.
Lachlan was employed in a foreign country from 15 October 2015 until 23 April 2016. He earned A$11,250 after he paid A$3,750 in foreign tax. He could claim a deduction of $A500 for work-related expenses.
After adding back the foreign taxes, Lachlan would have assessable foreign income of A$15,000. After claiming a deduction for his expenses, he would have net foreign employment income of A$14,500.
End of example
You may be able to claim a foreign income tax offset for the tax you’ve already paid.
In your tax return, convert all amounts into Australian dollars.
You must report all your foreign employment income in your Australian tax return, including assessable income and exempt income. This is the case even if tax was taken out in the country where you earned the income.