Changes to the exemption rules for foreign employment income

From 1 July 2009, income earned by Australian residents who are engaged in foreign services for a continuous period of 91 days or more will no longer be exempt from income tax, unless those foreign services are related to certain development projects, and charitable or government activities.

Foreign earnings that are subject to income tax will need to be included in your employee’s income tax return as assessable income and be subjected to 'pay as you go' (PAYG) withholding requirements. The tax withheld should be calculated as the amount that would normally be withheld in Australia under the relevant PAYG withholding tax table minus the equivalent Australian dollar amount of tax already paid to the foreign country