Foreign service straddling income years
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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 to determine the impact on your foreign earnings in applying both the:
- exempt foreign employment income provisions
- approved overseas projects provisions.
Example: Foreign service straddling income years
Claudia is an Australian resident who worked in England as a nanny for the period 12 April 2009 – 16 August 2010; a continuous period of 492 days.
Before 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 – 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 – 16 August 2010 will be taxed in Australia. She may be entitled to claim a foreign income tax offset in respect of the foreign tax paid on that income.
End of example
Absences that still count as foreign service
Some temporary absences during a period of foreign service still count as foreign service and will not affect continuity of the service. These are periods where in accordance with the terms and conditions of your foreign service (the absence is permitted by the employer, whether in an employment contract or under a separate arrangement) and for any of the following reasons:
- recreation leave on full pay that is attributable to the period of foreign service
- because of an accident or illness you suffer
- because of an accident or illness of another person other than you, including the death of another person
- in the course of carrying out either duties or training by your employer under a continuing foreign service engagement (work-related trips directly related to your foreign service) provided the absences are not excessive by comparison with the scheduled period of your foreign service
- short breaks such as weekends, public holidays, rostered days off, days off due to part-time arrangements, compulsory lay-off or layover days, grounded days, flexidays and days off in lieu – provided the break is part of the normal working conditions for your foreign service.
Example: Absence counting as foreign service
Tim is employed on a 12-month contract to work in China.
In exchange for forgoing public holidays, rostered days off and working weekends, he is given a two-week break for days off in lieu. He takes this break part way through his period of foreign service and spends it in Australia.
The 14-day break spent in Australia is part of the normal working conditions of Tim's scheduled 365 days foreign service. So it forms part of Tim’s period of foreign service, even though that time is spent in Australia.
End of example
Absences that do not count as foreign service
Longer absences during a period of foreign service will affect your continuity of the service and not count as foreign service. An example of this is maternity leave.
Taxpayers who die while on foreign service
A taxpayer who dies while on foreign service is taken to have been engaged in that foreign service for a continuous period of 91 days or more if the period of service would have been at least that long had they not died.