Understanding Foreign Employment

Employees who are Australian residents for tax purposes, and work in another country, are considered foreign workers, and all monies earned while on foreign assignment are considered foreign income.

According to ATO tax regulations, some of these foreign assignments are tax-exempt, while others are taxable foreign income, and must be reported as such. There are two types of taxable foreign assignments:

• Standard foreign assignments (foreign employment type F).

• Joint Petroleum Development Area (JPDA) assignments (foreign employment type J).

The Australian Tax Office (ATO) requires that all companies in Australia report detailed information about employee earnings on an annual basis by submitting foreign employment payment summaries.

To accurately create foreign employment payment summaries, you can use either of these two methods:

• Set up foreign employment date records, enter foreign employment tax information, create foreign pay types and DBAs, and process foreign work through the payroll cycle. The payment summary process then uses the payroll history that is created to generate foreign employment payment summaries.

  Note: Complete instructions for using this method are included in this chapter. This method is available in the software as an update to Release 9.1, and is not available in the base 9.1 release.

• Set up foreign employment date records, and manually enter data into foreign employment payment summaries.

  Note: This method is available in Release 9.1 base software, and is documented in (AUS) Processing Payment Summaries

Note: Some foreign income is still classified as exempt, and is still reported as foreign income on the Individual Non Business Payment Summary.

To create foreign employment payroll history, you must complete these tasks:

• Install the software update and perform all post-installation instructions. (Release 9.1 software update only)

• Set up tax rules for inputs 10 through 17.

• Set up foreign employment PDBAs.

• Enter foreign employment date records.

• Process the employee through payroll using foreign employment pay types.

See also: For additional information about the specific tax regulations, and to determine whether the foreign assignments your employees work on are taxable or exempt, contact the ATO directly. In addition, you can refer to these ATO's publications:

• State of Principle for Foreign Employment Payments.

• Specifications for Self-printing PAYG Withholding Payment Summaries - version 5.1.

• How to complete PAYG payment summary - foreign employment (NAT 73298).