In the Federal Budget handed down on 12 May 2009, the government proposed changes to the tax exemption available to Australian residents who work abroad for a period of more than 91 days.  
 
The changes to the exemption of income earned in overseas employment (section 23AG of the Income Tax Assessment Act 1936), which came into effect on 1 July 2009, involve moving away from Australia’s current tax exemption system in favour of adopting a foreign tax credit model. 
 
Currently, Australians working overseas for 91 days or more are eligible for a general exemption, which means they do not pay any Australian income tax on their foreign employment income. Under the new rules, most Australians working overseas are no longer eligible for the exemption; rather a tax offset will be available for any foreign tax paid on their foreign employment income. 
 
‘These changes affect Australian residents who are currently working abroad or considering an offshore post in the future, and also have the potential to impact the competitiveness of Australian companies operating in offshore locations,’ said Institute Tax Counsel Yasser El-Ansary, who has been involved in consultations with Treasury concerning the legislation and administrative arrangements for these changes. 
 
On Thursday, 11 June 2009 Mr El-Ansary appeared at the Senate hearing to give evidence in response to the Inquiry into the Tax Laws Amendment (2009 Budget Measures No. 1) Bill 2009. The evidence echoed the Institute’s submission to the Senate Economics Committee on 9 June, which argued for a reconsideration of the policy decision and the introduction of transitional arrangements for Australian residents who are currently working overseas. 
 
The Institute is seeking the introduction of transitional arrangements to ensure that these changes do not unduly impact those employees who are currently working under contracts overseas, that were entered into before the Budget announcement on 12 May 2009.  
 
 
 
Relevant links: 

• The Institute: Tax Bulletin edition 22
 

• The Institute: Submission to Senate Economics Committee
 

• Parliament of Australia: Senate website