As an Australian working overseas, you’ll need to adhere to tax legislation and conditions set out by the Australian Taxation Office (ATO). Regardless of the fact that you’ll be earning an income and paying tax in another country, you still need to file your tax return for Australia however, you may not need to pay any tax.
Keep records
At the point of starting paid employment in a foreign country, start keeping adequate records of your income and the tax you paid. This will ensure you have all of the information you need in order to complete your tax return when the time comes.
Exempt income
You may be exempt from paying tax on your foreign employment income if you’re a member of the Australian defence force or the police force. You may also be exempt if you’re part of an organisation engaged in overseas aid work. Regardless of what industry you’re employed in, you must still report all of your foreign income to ATO.
Reporting foreign tax
When it comes to reporting your foreign tax you’ll need to identify and claim your assessable foreign income. If you’ve paid foreign tax on your overseas income and it’s not exempt income, you add the foreign tax back to your net employment income (this is called grossing up) to determine the assessable amount. Include the income in your tax return as ‘Assessable foreign income’.
Tax withheld
Your Australian employer must withhold tax from non-exempt foreign employment income if they continue to pay you while you’re overseas. If your foreign employer is not registered for Australian PAYG withholding, it’s unlikely that they’ll withhold any amounts for Australian tax purposes from payments to you.
Tax Offset
If you have paid foreign tax in another country, you may be entitled to an Australian foreign income tax offset, which means you don’t have to pay tax twice. To be entitled, you must have paid foreign income tax and the income which you paid foreign income tax on must be included in your assessable income.
Converting to AUD
You’ll have to report your total earnings in your Australian tax return in Australian dollars. This includes both accessible and exempt income, regardless of whether tax was taken out in the country where you earned the income or not.
For more information on the conditions for completing your tax return or to lodge your tax return online from overseas, visit the ATO’s website.
If you need more information on how to assist your employees with their tax return while they’re working overseas, contact our dedicated mobility consultants.
