Foreign income exempt from tax
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Your foreign employment income is exempt from tax if all of the following applies:
- you're an Australian resident
- you're engaged in continuous foreign service as an employee for 91 days or more
- your foreign service is directly attributable to any of the following
- delivery of Australian Official development assistance by your employer (except if your employer is an Australian government agency)
- activities of your employer in operating a public fund declared by the Minister to be a developing country relief fund
- activities of your employer in operating a public fund established and maintained to provide monetary relief to people in a developing foreign country impacted by a disaster (a public disaster relief fund)
- activities of your employer as a prescribed charitable or religious institution exempt from Australian income tax because it's located outside Australia, or the institution is pursuing objectives outside Australia
- deployment outside Australia by an Australian government (or authority) as a member of a disciplined force
- you're not excluded from exemption by the non-exemption conditions.
If your foreign service is not directly attributable to these activities, you need to include the foreign employment income in your tax return as assessable income.
You may be entitled to a foreign income tax offset for amounts of foreign tax you have paid.
Australian Official development assistance
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Australian Official development assistance (ODA) is assistance delivered through the Australian Government's overseas aid program administered by the Department of Foreign Affairs and Trade (DFAT).
DFAT also contracts aid work to Australian and international entities. As a result, individuals involved in the delivery of Australian ODA can include both Australian Public Service (APS) employees and people who are not APS employees.
Australian official development assistance
Michelle is an Australian resident employed by the Department of Education and Training (DET). On 1 April 2016, she is posted to the Solomon Islands for 190 continuous days as a project advisor on an Australian ODA project aimed at improving the quality of early childhood education.
Michelle's foreign service is directly attributable to the delivery of Australian ODA by her employer.
Michelle's foreign earnings before 1 July 2016 are eligible for exemption from tax in Australia, subject to the non-exemption conditions. However, as an Australian government employee delivering ODA from 1 July 2016, her foreign earnings are not eligible to be exempt from Australian income tax.
Michelle's foreign income from her service for the period 1 July 2016 to 7 October 2016 will be taxed in Australia, and she may be entitled to claim a foreign income tax offset in respect of any foreign tax paid on that income.
Eric is an Australian resident motor mechanic employed by a private company contracted by the Department of Foreign Affairs and Trade (DFAT) to provide vocational training in Vanuatu. He is posted to Vanuatu for 180 continuous days.
Eric's foreign service is directly attributable to the delivery of Australian ODA by his employer. Therefore, his foreign earnings are eligible for exemption, subject to the non-exemption conditions.
Jamie is an Australian resident member of the Australian Civilian Corps who has been deployed to Papua New Guinea (PNG) to provide specialist assistance. She is deployed to PNG from 1 February 2016 to – 5 August 2016.
Jamie's foreign service is directly attributable to the delivery of Australian ODA by her employer – an Australian government agency.
The foreign employment income she derives from 1 February 2016 – 30 June 2016 is eligible for the exemption, subject to the non-exemption conditions. The foreign employment income she derives from 1 July 2016 – 5 August 2016 is not exempt, due to the withdrawal of the exemption for Australian government employees from 1 July 2016.
End of example
Australian government agency
An Australian government agency means:
- the Commonwealth, a state or a territory
- an authority of the Commonwealth or of a state or a territory.
Developing country relief fund
A developing country relief fund is a fund established by an organisation solely for the purpose of providing relief to people of a developing country.
The organisation must be an approved organisation as declared by the Minister for Foreign Affairs, and the country must be a developing country as declared by the Minister for Foreign Affairs.
Example: Developing country relief fund
Maria is a social worker employed by Peace Group, a charitable organisation that provides assistance to developing countries. Maria is posted to Nigeria for 120 days to help provide relief to people in distress.
Peace Group is an organisation that has been approved as operating a developing country relief fund. This means Maria's foreign employment income is eligible for the exemption.
End of example
Public disaster relief fund
A public disaster relief fund is a fund established and operated by a public benevolent institution in response to an event recognised as a disaster by the Minister for Foreign Affairs.
If you're unsure if you work for a developing country relief fund or a public disaster relief fund, you should seek advice from your employer.