Termination payments – unused long service leave payments and overseas employment

23 May 2011

Tax payers who work overseas for a continuous period of at least 91 days - but remain resident in Australia for tax purposes - should be aware that if their employment is terminated on return and they receive a lump sum payment with an unused long-service leave component that it may be exempt from income tax under foreign employment earning rules.

Provided the general conditions of part s23AG of ITTA 1936 are satisfied, the amount of long service leave is exempt. This is because long service leave accrues daily and the portion accrued for foreign service tenure is also exempt foreign earnings. Thus the taxpayer would only be assessed on the portion attributable to Australian service.

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Contact Matt Zhou on 02 9957 4033 for more information about International Tax and the implications for taxpayers.

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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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