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  • Working on an approved overseas project

    Your foreign income may be exempt from tax if you are an Australian resident and you worked continuously for 91 days or more on an approved overseas project.

    An approved overseas project is a project which is, or will be, in the national interest and is approved in writing by Austrade (Australian Trade and Investment Commission). Austrade should provide a project number to your employer or contractor.

    Approved overseas projects

    Examples of approved overseas projects include projects that are:

    • for the design, supply or installation of any equipment or facilities
    • for the construction of works
    • for the development of an urban area or a regional area
    • for the development of agriculture
    • giving advice or assistance relating to the management or administration of a government department or a public utility
    • included in a class of projects approved in writing by the Trade Minister such as a project for the    
      • development of natural resources
      • supply of agricultural services carried out on behalf of the government, public utility or a corporation owned by the government or operating under government authority
      • development, installation, management or administration of medical programs and facilities.
       

    If you are working, or have worked on an overseas project and would like to know whether it has been approved by Austrade, phone us on 13 28 61.

    See also:

    Income exempt from tax

    Your income from an approved overseas project will be exempt from tax in Australia if you satisfy the following two conditions:

    • you are employed, or perform personal services as a contractor, on an approved project for a continuous period of 91 days or more
    • your income from working on the project is not excluded by any of the non-exemption conditions.

    Continuous period of service

    For the exemption from Australian tax to apply on your income from an approved overseas project, you must meet qualifying service or a continuous period of 91 days or more.

    A period of absence breaks the continuity of your qualifying service, unless:

    • the absence does not exceed one-sixth of your total period of qualifying service
    • the absence is one which still counts as qualifying service.

    The ‘one-sixth test’

    Absences which would otherwise break the continuity of your period of service for the purposes of the '91 days or more' requirement can be bridged by applying the one-sixth test. The one-sixth test means that as long as your absences don’t exceed one sixth of your period of qualifying service, your absences won’t break the continuity of your service.

    Example: one-sixth test with continuous service – approved overseas project

    Noral is engaged on an approved overseas project which is broken by an absence in Australia:

    Period of qualifying service 1:

    185 days

    Absence:

    31 days

    Period of qualifying service 2:

    55 days

    Noral's total period of qualifying service is 240 days (185 plus 55). Noral's absence of 31 days does not exceed one-sixth of her total service. Therefore the two periods of qualifying service on an approved overseas project are treated as a continuous period.

    End of example

    Example: one-sixth test with broken service – approved overseas project

    Bob is engaged on an approved overseas project which is broken by an absence in Australia:

    Period of qualifying service 1:

    185 days

    Absence:

    60 days

    Period of qualifying service 2:

    55 days

    Bob's total period of qualifying service on an approved overseas project is 240 days (185 plus 55). As Bob's absence of 60 days exceeds one-sixth of the total period, Bob's period of qualifying service after the absence is treated as a separate period. The number of days of continuous service in the new period starts from the first day of that period.

    End of example

    Qualifying service on an approved project

    Your period of qualifying service on an approved overseas project includes:

    • the time that you are outside Australia working on the approved project
    • the time you spend travelling between Australia and the site of the approved project (provided that the travel time is reasonable)
    • any occasions that you are absent from work due to an accident or illness during the period that you are working on the approved project, provided you resume your service immediately after the incapacity ceases
    • any occasions you are on paid leave (other than long service leave or sick/personal leave) that accrues while you are working on the approved project
    • any breaks that are a normal incidence of work arrangements, such as weekends, public holidays and equivalent time off.

    If your service ends early due to unforeseen circumstances

    If your period of service on an approved project ceases due to unforeseen circumstances, that period is taken to also include the period you would have been on the project but for the unforeseen circumstances.

    Non-exemption conditions

    Your income is not exempt if any of the following apply:

    • You are an employee and your income is already exempt foreign employment income.
    • The income is exempt from income tax in the foreign country solely because of the existence of a tax treaty between Australia and that country.
    • The payment is for long service leave or is a superannuation or pension payment.

    See also:

    Completing your tax return

    Although exempt foreign employment income is not included in your assessable income, you still need to show it in your tax return because it affects the rate of tax payable on your taxable income.

    If your foreign employment income is not exempt, include it in your tax return. If you paid foreign income tax, include the amount of tax that you paid in your assessable foreign source income. You may be eligible to claim a foreign income tax offset.

    For help applying this to your own situation, phone us on 13 28 61.

    See also:

    Individuals working for certain international organisations

    If you work for an international organisation that is covered by the International Organisations (Privileges and Immunities) Act 1963 (IOPI Act), your income may be exempt from tax in Australia if:

    • regulations specify that the organisation is an international organisation for the purposes of the IOPI Act
    • your engagement with the international organisation is connected in a way that enables the income you receive to be exempt from income tax.

    These conditions are provided in the regulations applicable to the international organisation.

    For further information see:

    • TR 2019/D1 Income tax: income of international organisations and persons connected with them that is exempt from income tax
      Last modified: 23 Apr 2019QC 18313