Step 1: type of employment
Is your foreign employment income from you doing any of the following:
- the delivery of Australian official development assistance by your employer, except if your employer is an Australian government agency
- the activities of your employer in operating a public fund that is either
- declared by the Minister to be a developing country relief fund
- operated by a public benevolent institution solely to provide monetary relief to people who are distressed as a result of a disaster
- the activities of your employer that as a prescribed institution is exempt from Australian income tax
- your deployment outside Australia by an Australian Government (or an Australian Government authority) as a member of a disciplined force
- an activity of the kind specified in the regulations.
If yes, go to step 2.
If no, your foreign employment income is not exempt from Australian tax under 23AG.
If you're not certain if your employment falls within one of these activities, you can:
- apply for a private ruling
- contact us
- speak to your employer.
Step 2: continuous service for 91 days or more
Are you engaged in continuous foreign service as an employee for 91 days or more?
If yes, go to step 3.
If no, your foreign employment income is not exempt from Australian tax under 23AG.
Step 3: no non-exemption conditions apply
Do any the following apply to you?
Your income is exempt in the other country because of one or more of the following:
- Australia has a tax treaty (also called a double tax agreement) with the other country or there is a law giving effect to a treaty agreement.
- The other country does not impose tax on, or exempts from tax, your employment income, personal services income or similar income.
- A law of the other country, or an international agreement to which Australia is a party, deals with privileges and immunities for diplomats, consular staff and people connected with international organisations (such as the United Nations).
If yes, go to step 4.
If no, your foreign employment income is exempt from Australian tax under 23AG.
Tax treaty
Australia has tax treaties (also known as double tax agreements or International tax agreements) with a number of other countries. These treaties may affect the way we tax your foreign employment income. A tax treaty will only apply to you if you're an Australian resident or resident of the other country.
If your foreign employment income wasn't taxed in the other country because of a tax treaty (or a law giving effect to a treaty agreement), and there are no other reasons that it was not taxed in the other country not listed above, the foreign employment exemption won't apply. That income will be taxable in Australia.
Step 4: additional exemption reasons
If there was another or additional reason that your income wasn't taxed in the other country, you may still qualify for an exemption from tax in Australia. Other or additional reasons may include if:
- your income was less than the amount at which tax starts in the other country
- your income falls into a special category that the other country exempts (for example, payments to visiting aid project workers)
- a memorandum of understanding (MOU) between Australia and the other country exempts the payments (for example, a MOU between Australia and a developing country for Australians to assist that country)
- your income includes supplements paid in Australia under the Australian Staffing Assistance Scheme (ASAS) for overseas service.
If you're working on an approved project
Your foreign income may be exempt from tax if you're working on an approved overseas project. This exemption under 23AF is separate to the foreign employment exemption under 23AG. The Minister for Trade (Austrade) is responsible for approving 'eligible projects'. Your employer will advise you if you're working on an approved overseas project.
You'll be able to claim the approved overseas project exemption if you meet the conditions, including working 91 days or more on the project.