In a major surprise, the Treasurer has announced new
arrangements for taxing foreign employment income earned by
Australian resident taxpayers.
The Government proposes that the new rules will apply to income
derived on or after 1 July 2009. The existing rules will
apply to foreign employment income derived on or before 30 June
The Treasurer has released exposure draft legislation to amend
the current general income tax exemption for income earned in
overseas employment contained within section 23AG of the Income Tax
Assessment Act 1936 (ITAA 36).
The Government is accepting submissions in relation to this
change up until Monday 18 May 2009!
This timeframe is clearly unrealistic as the draft legislation
was only released last night. Moore Stephens is preparing a
submission to argue against these ill conceived changes and needs
Under the measures in the proposed legislation, the general
exemption will only apply to income earned by:
an aid or charitable worker employed by a recognised
non-government organisation; or
a government aid worker; or
a specified government employee (for example, defence and
police force personnel deployed overseas).
Income earned by an individual employed on an overseas project
approved by the Minister for Trade as being in the national
interest will be exempt as well, as it is under the existing
For all others foreign employment income will be fully taxable
in Australia at resident tax rates.
Individuals will be able to claim a non-refundable tax offset
for foreign income tax paid on that income.
However, many foreign countries levy tax at a lower rate than
Australia so most Australian residents who earn income overseas
would pay less tax than they would if they earned the income solely
in Australia. As a result of the change individuals will end up
paying more tax in Australia.
Section 23AG of the ITAA 36 is important to Australian residents
who work overseas. In broad terms, it grants an exemption from
Australian income tax for foreign sourced employment earnings
derived by an Australian resident in respect of overseas work
assignments that are of at least 91 continuous days in duration in
a location that ordinarily imposes income tax on that income.
Moore Stephens strongly opposes the changes in their current
form as we believe that this treatment is unnecessarily harsh on
Australian working overseas. We will be lodging a submission in
respect of the proposed changes.
Should you wish to comment and have your voice heard through
our submission, please contact Moore Stephens no later than
Thursday 14 May 2009.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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