Timor Sea Treaty - Joint Petroleum Development Area instructions
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Introduction
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 former treaty). To ensure you fill in your tax return correctly, either use these instructions yourself or give them to your registered tax agent.
If you were an Australian resident for tax purposes during 2019-20, use part 1 of these instructions.
If you were a Timor-Leste resident for tax purposes, see part 2 of these instructions for JPDA income you derived during 1 July 2019 to 29 August 2019.
If you were a resident of a country other than Australia or Timor-Leste for tax purposes, use part 3 of these instructions for JPDA income you derived during 1 July 2019 to 29 August 2019.
If you:
- were not an Australian resident for tax purposes, and
- did not earn JPDA income during 1 July 2019 to 29 August 2019
your JPDA income is not taxable in Australia.
Background
In 2018 Australia and Timor-Leste entered the Timor Sea Maritime Boundaries Treaty (the 2018 treaty). The 2018 treaty transitions the JPDA to Timor-Leste's exclusive jurisdiction, and came into effect for Australia on 30 August 2019.
The former treaty ceased to be in force from 30 August 2019, however certain taxation arrangements that applied under Annex G of the former treaty continue to apply for Australian resident employees (but not for independent contractors) working in the JPDA.
Source of income
Under the former treaty, the JPDA was deemed to be part of Australia and of Timor-Leste for the purposes of the tax laws of Australia and Timor-Leste.
Under the 2018 treaty, from 30 August 2019 the JPDA is deemed to be exclusively part of Timor-Leste for the purposes of those tax laws. Income derived from working in the JPDA on or after 30 August 2019 is deemed to have been sourced only in Timor-Leste.
From 30 August 2019, the following changes apply:
- For Australian residents:
- JPDA income is taxed at resident rates of tax for individuals
- the foreign income tax offset (FITO) for an employee is the lesser of:
- Australian tax payable on the net assessable JPDA income (JPDA income less allowable deductions relating to that income)
- Timor-Leste tax paid on JPDA employment income
- the FITO for an independent contractor is worked out under the ordinary FITO rules.
- For foreign residents:
- JPDA income is not taxed in Australia.
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
- 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.
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.
Completing your Australian tax return
Complete your tax return by following these instructions:
- Complete the Schedule of additional information - item 20 Joint Petroleum Development Area.
- If you are completing a paper tax return you will need to refer to Individual tax return instructions 2020 and Individual tax return instructions supplement 2020, and attach your completed schedule to page 3 of your tax return. Print X in the Yes box at Taxpayer's declaration question 2 on page 10 of your tax return.
- Read the instructions below and go to the parts that apply to you:
- If you chose a on the schedule of additional information, go to Part 1 - Australian Resident.
- If you chose b on the schedule of additional information, go to Part 2 - Resident of Timor-Leste.
- If you chose c on the schedule of additional information, go to Part 3 - Resident of another country.
- If you chose d on the schedule of additional information, you may need to apportion your JPDA income and complete more than one part. You will need to follow the instructions in
- Part 1 for the period that you were an Australian resident
- Part 2 for the period that you were a resident of Timor-Leste
- Part 3 for the period that you were a resident of another country.
Part 1 - Australian Resident
Use this part if you were an Australian resident for tax purposes during 2019-20.
What you need
- You will need details of your JPDA income and any foreign tax paid from your tax-ready income statement, PAYG payment summary - foreign employment for 2019-20, or a letter from your employer.
- If you are completing a paper tax return, you will need Individual tax return instructions 2020 and Individual tax return instructions supplement 2020. To find out how to get copies of these publications, see More information.
You need to know
You are taxed on your net assessable JPDA income at resident rates of tax with a foreign income tax offset allowed for the lesser of the:
- Australian tax payable on your net assessable JPDA income, and
- Timor-Leste tax paid on your JPDA employment income.
What you need to do
Use worksheets 1 and 2 to complete the following items on your tax return:
- item 1 Salary or wages, for income
- items D1 to D5, for deductions for work-related expenses
- U Net foreign employment income and O Foreign income tax offset item 20 (in the supplementary section) for foreign source income and foreign assets or property.
Follow these steps to complete your tax return:
- Complete worksheet 1. This shows you how to deal with your JPDA income and deductions.
- Complete all parts of your tax return except:
- item 20 (supplementary section)
- Total supplement tax offsets (supplementary section)
- item T (Tax return for individuals, page 5)
- Total tax offsets (Tax return for individuals, page 5).
- Complete worksheet 2. This shows you how to work out your foreign income tax offset for your net assessable JPDA income. In the course of completing worksheet 2, you will complete O item 20 on your tax return (supplementary section).
- Complete the remainder of your tax return.
Example 1 will help you fill in worksheets 1 and 2.
Example 1 Jose, an employee driller, lived in Darwin (zone A) when he was not at a drilling site. For eight months of the income year he worked in the JPDA. Jose's tax-ready income statement from non-JPDA employment showed $74,000 gross salary and Australian PAYG tax withheld of $26,260. A separate tax-ready income statement from his JPDA employment showed gross salary of $96,000 relating to his period in the JPDA and that, in addition to the $12,152 Australian tax withheld, $17,280 tax had been withheld and paid to Timor-Leste. The amount paid to Timor-Leste was shown on the income statement at the 'foreign tax paid' label. Jose had work-related expenses of $700 of which $500 related to his work while in the JPDA. He had no other income or deductions. Jose's taxable income is therefore $169,300. Jose had no dependants. He had appropriate hospital cover for the whole year and was not liable to pay Medicare levy surcharge. He is entitled to a zone offset of $338 as he lived in Darwin for more than 183 days. Worksheet 1 - Jose
Worksheet 2 - Jose
Note: This includes any Medicare levy and Medicare levy surcharge payable. Jose's foreign income tax offset is the lesser of row f and row g. Jose's foreign income tax offset is $17,280. Jose includes his foreign income tax offset at O item 20 on his tax return (supplementary section). Jose will receive a refund of $2,506. This is:
If Jose had worked in Australia for the full year and had the same income and deductions, he would have completed the tax return differently and had a different PAYG Australian tax withheld amount, but his refund would have been the same. Calculations are based on monthly payments. |
Worksheet 1: Net assessable JPDA income subject to tax in Australia and Timor-Leste
If you have more than tax-ready income statement or one PAYG payment summary - foreign employment or PAYG payment summary - individual non-business showing JPDA income, add them together to work out your total gross JPDA income figure.
Worksheet 1
Row | Calculation elements | Amount |
| a | Total gross JPDA income included on your income statements and PAYG payment summaries Include this amount at item 1 on your tax return. | $ |
| b | Total work-related expenses directly related to your JPDA income (see note) Include this amount at the appropriate items in D1 to D5 on your tax return. | $ |
| c | Take row b away from row a. Include the amount at row c at U item 20. This is the amount of your net assessable JPDA income. | $ |
Note: Work-related expenses are explained at questions D1 to D5 in Individual tax return instructions 2020.
Did you have work-related expenses?
If you had work-related expenses relating to your JPDA income (that is, you showed an amount at (b) in worksheet 1), then complete items D1 to D5 on your tax return.
These items deal with deductions for work-related expenses as follows:
- D1 car
- D2 travel
- D3 clothing
- D4 self-education
- D5 others.
Completing worksheet 2
You cannot use worksheet 2 if you have:
- exempt foreign employment income
- other foreign income
- unapplied foreign losses from prior years
- other foreign income tax offsets available.
If any of the above apply, read Guide to foreign income tax offset rules 2020.
Worksheet 2: Foreign income tax offset calculation
Worksheet 2
Row | Calculation elements | Amount |
| a | Taxable income as shown on your tax return | $ |
| b | Tax (see note) on taxable income using our rates and calculators | $ |
| c | Net assessable JPDA income (the amount at (c) in worksheet 1 shown at U item 20). | $ |
| d | Take row c away from row a. | $ |
| e | Tax (see note) on row d. | $ |
| f | Take row e away from row b. | $ |
| g | Tax paid to Timor-Leste on your JPDA income as advised by your payer | $ |
Note: This includes any Medicare levy and Medicare levy surcharge payable
Your foreign income tax offset is the lesser of row f and row g.
Include your foreign income tax offset at O item 20 on your tax return (supplementary section).
If you earned JPDA income as an independent contractor (not an employee), complete the worksheets only for taxable income for 1 July 2019 to 29 August 2019. You must apply the ordinary foreign income tax offset rules for your taxable income from 30 August 2019. See Calculating and claiming your foreign income tax offset.
If you chose d on the Schedule of additional information, go to Part 2 - Resident of Timor-Leste . Otherwise, go to Check that you have...
Part 2 - Resident of Timor-Leste
Use this part if you were a resident of Timor-Leste for tax purposes and earned JPDA income during 1 July 2019 to 29 August 2019.
What you need
- Details of your JPDA income for 1 July 2019 to 29 August 2019 from your tax-ready income statement or PAYG payment summary - foreign employment
- If you are completing a paper tax return, you will need Individual tax return instructions 2020 and Individual tax return instructions supplement 2020. To find out how to get copies of these publications, see More information.
You need to know
10% of your income earned for work or services performed in the JPDA during 1 July 2019 to 29 August 2019 is taxed in Australia. Your payer should have deducted Australian tax at the minimum rate of 32.5% on 10% of your JPDA income.
When completing items D1 to D5, show only 10% of your expenses relating to your work in the JPDA during 1 July 2019 to 29 August 2019.
What you need to do
Before you start on item 1 on your tax return, complete worksheet 3. First, add up the gross amounts shown on all your payment summaries that are JPDA income. Example 2 below has been provided to help you fill in worksheet 3.
Example 2 Peter, a labourer, was a resident of Timor-Leste for the whole year. His PAYG payment summary - foreign employment shows a gross payment of $28,000 for 1 July 2019 to 29 August 2019 and Australian PAYG tax withheld of $910. His sole source of income was from the JPDA. Peter had work-related expenses of $100 for this period. Peter will claim $10 (that is, 10% of $100) as his work-related expenses at D5 Other work-related expenses on his tax return. Peter's taxable income is $2,790. His Australian tax payable is $906.75. Therefore, he will receive a tax refund of $3.25, that is, $906.75 (tax payable) minus $910 (tax withheld). Peter uses worksheet 3. Worksheet 3 - Peter
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Worksheet 3: Assessable JPDA income for resident of Timor-Leste
Worksheet 3
Row | Calculation elements | Amount |
| a | Gross JPDA income for 1 July 2019 to 29 August 2019 included on your tax-ready income statement or payment summary | $ |
| b | Divide a by 10. | $ |
Include the amount at row b at item 1 on your tax return.
Include 10% of any work-related expenses that relate to your JPDA income for 1 July 2019 to 29 August 2019 at items D1 to D5.
If you chose D on the schedule of additional information, go to Part 3 - Resident of another country Otherwise, go to Check that you have...
Part 3 - Resident of another country
Use this part if you were a resident of a country other than Australia or Timor-Leste for tax purposes and earned JPDA income during 1 July 2019 to 29 August 2019.
What you need
- Details of your JPDA income from your income statement for 1 July 2019 to 29 August 2019 from your tax-ready income statement or PAYG payment summary - foreign employment
- If you are completing a paper tax return, you will need Individual tax return instructions 2020 and Individual tax return instructions supplement 2020. To find out how to get copies, see More information.
You need to know
Your net income earned for work or services performed in the JPDA during 1 July 2019 to 29 August 2019 is taxed in Australia. You can claim a tax offset of 90% of Australian tax payable on that income. Your payer should have withheld 10% of the applicable Australian tax on your JPDA income for this period.
What you need to do
Show all your Australian income (including your JPDA income for 1 July 2019 to 29 August 2019) and deductions as instructed by Individual tax return instructions 2020. Use worksheet 4 or worksheet 5 to calculate your tax offset.
Use worksheet 4 if the only Australian income you had was JPDA income; otherwise, use worksheet 5. If you are using worksheet 5, example 3 will assist you.
Worksheet 4: JPDA tax offset for foreign residents (other than residents of Timor-Leste) whose only Australian income is JPDA income
Worksheet 4Worksheet
Row | Calculation elements | Amount |
a | Your taxable income as shown on your tax return | $ |
b | Calculate your tax using the rates and calculators | $ |
c | Multiply row b by 90. | $ |
d | Divide row c by 100. | $ |
The amount at d is your JPDA tax offset. Include this amount at C item T9 Other non-refundable tax offsets on your tax return (supplementary section).
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Gavin, a chef, was a resident of Malaysia for the whole year. His Australian assessable income was $30,000, of which he earned $24,000 JPDA income. He paid $100 for work-related expenses related to earning his JPDA income but had no other allowable deductions. He had no other amount to show at item T9. Gavin uses worksheet 5 below to calculate his JPDA tax offset. Worksheet 5 - Gavin
Gavin's JPDA tax offset is $6,990.75. He transfers this amount to C item T9 on his tax return (supplementary section) and prints H in the CLAIM TYPE box at the right of C. |
Worksheet 5: JPDA tax offset for foreign residents (other than residents of Timor-Leste) who have JPDA income and other Australian income
Worksheet 5
Row | Calculation elements | Amount |
a | Your taxable income as shown on your tax return | $ |
b | Calculate your tax using the calculators and tools | $ |
c | Multiply row b by row a (round to 3 decimal places). | $ |
d | Net JPDA income for 1 July 2019 to 29 August 2019 (after any allowable deductions relating to the JPDA income) | $ |
e | Multiply row c by row d. | $ |
f | Multiply row e by 90. | $ |
g | Divide row f by 100. | $ |
The amount at row g is your JPDA offset. Include this amount at C item T9 Other non-refundable tax offsets on your tax return (supplementary section).
Check that you have...
- completed the items on your tax return as shown in the relevant parts
- attached your completed Schedule of additional information: Item 20 Joint Petroleum Development Area to page 3 of your tax return
- printed X in the Yes box at Taxpayer's declaration question 2 on page 10 of your tax return.
More information
Publications
- Guide to foreign income tax offset rules 2020
- Individual tax return instructions 2020
- Individual tax return instructions supplement 2020
- Private ruling application form
- Schedule 10 - Tax table for Joint Petroleum Development Area (NAT 7288). This explains how your employer calculates the tax to be withheld and paid to Australia.
To get copies of publications referred to in this guide:
- go to ato.gov.au/publications
- phone 1300 720 092
Phone
13 28 61
Individual income tax and general personal tax enquiries.
Completing the schedule
- Determine your residency for tax purposes (see Residency status) for the periods during 2019-20 when were in the JPDA then complete this schedule.
- Print and complete this schedule.
- Attach the completed schedule to page 3 of your tax return.
- Print X in the Yes box at Taxpayer's declaration question 2 on page 10 of your tax return.
Schedule of additional information: Item 20 Joint Petroleum Development Area I declare that I worked in the Joint Petroleum Development Area. Name: Tax file number: ________ ________ _______ Choose from the following:
Dates (day, month, year) Country 01 / 07 / 2019 to ____/ _____/ 20____ _________________ ____/ ____/ 20____ to ____/ _____/ 20____ _________________ ____/ ____/ 20____ to ____/ _____/ 20____ _________________ ____/ ____/ 20____ to ____/ _____/ 20____ _________________ ____/ ____/ 20____ to ____/ _____/ 20____ _________________
Signed: |
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
ATO references:
NO NAT 8277; QC 55257
| Date: | Version: | |
| 1 July 2013 | Original document | |
| 1 July 2014 | Updated document | |
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