Clarification of tax system for expat Australians

by Ray Clancy on April 9, 2010

A move is underway to clarify tax rules for Australian expats after concerns were raised that those working overseas could end up being taxed twice.

From July last year the foreign employment income of most Australians working overseas was no longer exempt from Australian income tax and was instead included in the assessable income of the employee and subject to the appropriate marginal tax rates. Overseas based Australian also came under the employees into the fringe benefit tax (FBT) base for the first time.

‘These measures were introduced to ensure Australian workers who earn income overseas do not have an unfair advantage over workers who earn income and pay tax in Australia,’ said assistant treasurer, Nick Sherry.

However, he confirmed that he was now giving further details on how the implementation of those measures ensures that there is no double taxation of Australians working overseas. The new measures have been formulated following extensive consultation with industry and the Australian Taxation Office.

Australians working overseas will now be able to claim a foreign income tax offset for the foreign income tax paid on those amounts now included in their assessable income.  ‘I can confirm that these taxpayers will not be required to lodge a foreign tax return to demonstrate and claim amounts of foreign tax paid. All they will be required to do is to keep their normal pay slips, assuming they identify amounts withheld, and under our self-assessment regime these pay slips will only need to be provided if the ATO undertakes an audit,’ Sherry explained.

In addition, if other countries operate a different financial year for tax purposes, foreign tax offsets claimed against Australian tax should be applicable to income derived in the Australian income year and taxpayers should apportion their foreign income and foreign income tax offsets.  ‘The general application of FBT to overseas based Australian employees is appropriate as it ensures there is consistent treatment of employee remuneration regardless of whether it is received as cash or as a non-cash benefit. However, there have been some concerns expressed about the treatment of ‘fly-in-fly-out’ arrangements that are common in the mining sector for example,’ Sherry added.

He confirmed that he has ‘worked with stakeholders and the ATO on how the law would be applied to flights to and from remote overseas mining work sites, including analysing a range of scenarios provided by key industry operators’.  Sherry added that the ATO has indicated that there is no impediment to the otherwise deductible rule that applies within Australia also being applied to overseas fly-in-fly-out arrangements that are factually similar in nature other than the difference of one being domestic and one being international.

{ 2 comments… read them below or add one }

mid.east.xpat August 31, 2010 at 4:29 pm

But what if you are a non-resident for tax purposes? We have lived in the Middle East for 2.5 years where our earnings are tax free. Surely they can't be trying to tax every single Australian who is permenantly living overseas. That would be like the Australian Government 'owning' your income earning ability forever.


Michelle July 10, 2014 at 3:01 am

This recent decision in the Administrative Appeals Tribunal effectively reined in the ATO’s approach to taxing non-residents. Worth a read for any Aussie expats living and working overseas.


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