Post-implementation Review – Treasury
As part of the 2009-10 Budget, the Government announced a change to the income tax exemption for the foreign service income of Australians working overseas in certain circumstances. The change was part of a package of measures to improve the fairness and integrity of the tax system. Specifically, the measure removed the income tax exemption for Australians working overseas for a continuous period of 91 days (the exemption was retained, however, for Australians engaged in foreign services related to development, aid, defence and related activities). The initial policy intent behind the exemption was to prevent Australians working overseas from needing to pay tax on their income twice (to Australia and to the country in which the income was earned). However, the exemption was found to be inequitable, as people who were employed for fewer than 91 days were still required to pay tax. Also, in practice, little foreign tax was actually paid on the foreign income concerned and the Foreign Income Tax Offset regime allows Australian taxpayers to offset tax paid overseas (with respect to foreign income) against their Australian tax liability. A Prime Minister’s exceptional circumstances exemption was provided for the package of measures announced during the 2009-10 Budget, including the change to the income tax exemption for foreign service income. Consequently, Treasury was required to prepare a post-implementation review (PIR) to assess the impact of this change on business and other affected parties. The PIR concludes that the measure is meeting its policy intent of removing an unwarranted tax exemption and having only a low impact on business and the not-for-profit sector. The PIR was prepared by the Treasury and was assessed as adequate by the Office of Best Practice Regulation.
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