Tax Certainty For Australian Expats

By Editorial 07 April, 2010

Australia’s Assistant Treasurer, Nick Sherry, has announced further measures to provide additional clarity on specific issues raised by industry regarding the implementation of changes to the taxation of Australian residents employed overseas.

The announcement detailed the procedures relating to the lodgement of tax returns by Australians working overseas and certain fringe benefit tax (FBT) arrangements, with the latter timed to coincide with the commencement of the new FBT year on April 1.

Measures introduced in the 2009/10 budget meant that from July 1, 2009, the foreign employment income of most Australians working overseas was no longer exempt from Australian income tax. It is instead included in the assessable income of the employee and subject to the appropriate marginal tax rates. The measures also brought overseas-based Australian employees into the 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," Sherry said.

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 (ATO).

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,” Sherry added. “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."

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," the Assistant Treasurer said. "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."

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.”

He was able to announce 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.”

A comprehensive report in our Intelligence Report series devoted to a study of the ways in which expatriate executives and employees can optimise their remuneration and taxation situations in a number of the main English-speaking countries is available in the Lowtax Library at and a description of the report can be seen at

Tags: Individuals | Expatriates | Tax | Mining | Employees | Australia | Individual Income Tax |


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