Who should use these instructions?
Use these instructions if you have earned income for performing work or services in the Joint Petroleum Development Area (JPDA) as defined in the Timor Sea Treaty (the treaty).
To ensure you fill in your tax return correctly, either use these instructions yourself or give them to your registered tax agent.
Background
The treaty was signed on 20 May 2002 and applies from that date.
The treaty is an agreement between Australia and Timor-Leste (formerly East Timor) which creates the JPDA. It provides the framework for how the petroleum resources within the JPDA are to be shared. The treaty grants 90% of the petroleum resources to Timor-Leste and 10% to Australia.
Source of income
The treaty specifies that for the purposes of the tax laws of Australia and Timor-Leste, the JPDA is deemed to be part of Australia and Timor-Leste. Therefore, income derived from working in the JPDA is sourced in both Australia and Timor-Leste.
The effect of the treaty is that:
- Australian residents are taxed on their total JPDA income at resident rates of tax, with a foreign income tax offset allowed for the lesser of the
- Australian tax payable on the net assessable JPDA income (see note), and
- tax paid to Timor-Leste
- residents of Timor-Leste are taxed on 10% of their net assessable JPDA income (see note) at foreign resident rates of tax
- residents of countries other than Australia and Timor-Leste are taxed on their total JPDA income at foreign resident rates of tax, with a tax offset allowed equal to 90% of the Australian tax payable on their net assessable JPDA income (see note).
Note: Net assessable JPDA income is assessable JPDA income less allowable deductions relating to that income.
Residency status
Residency status is determined by the laws of each country.
Generally, we consider you to be an Australian resident for tax purposes if you have:
- always lived in Australia or you have come to Australia and live here permanently, or
- been in Australia for more than six months during the income year (unless your usual home is overseas and you do not intend to live in Australia).
The standards we use to determine residency status are not the same as those used by the Department of Immigration and Border Protection.
In limited circumstances you may be considered to be a resident of both Australia and Timor-Leste. The treaty contains rules to determine the country in which you are a resident solely for the purposes of the treaty.
If you are not sure of your residency status, see Work out your residency status for tax purposes or phone 13 28 61.
Zone tax offset
The JPDA does not qualify as a remote or isolated area of Australia for purposes of the zone tax offset.