What This Determination Covers
TD 2012/8 is an ATO tax determination that explains which types of temporary absences count as part of a continuous period of foreign service for the foreign earnings tax exemption under section 23AG of the Income Tax Assessment Act 1936.
It matters mainly for businesses that post Australian resident employees overseas on deployments, since it affects whether those employees' foreign income is exempt from Australian tax.
Absences That Count Toward Foreign Service
- Recreation leave accrued during the deployment
- Leave due to the employee's own accident or illness
- Leave due to the accident or illness of another person
Sick leave or leave due to accident or illness, whether of the employee or another person, has no cap on how much can count as foreign service. This is unlike recreation leave, which is capped to the amount accrued during the deployment.
Absences That Break the Continuous Period
- Long service leave
- Furlough
- Extended leave
- Maternity or parental leave
- Leave not accrued during the foreign service
Long service leave, furlough, extended leave, maternity leave and parental leave do not count as foreign service regardless of when they accrued.
Application
The determination applies both before and after its date of issue, meaning it already reflects the ATO's current position, not a future change.
Key Actions
- Check whether leave taken during the deployment was accrued during the foreign service period or beforehand, as this affects tax exemption eligibility
- Review employment contracts or deployment terms to confirm what types of leave are permitted during foreign postings, since the leave must be allowed under the terms and conditions of the foreign service to count
- Be aware that long service leave, furlough, extended leave, maternity leave and parental leave do not count as foreign service regardless of when they accrued
- Note that sick leave or leave due to accident or illness has no cap on how much can count as foreign service, unlike recreation leave which is capped to the amount accrued during the deployment
- If a deployment includes a break in service, check the one-sixth rule in subsection 23AG(6A) to see if separate periods can be combined into one continuous period of foreign service
This is a plain-English summary for information only, not legal or compliance advice. Always check the official source or consult a qualified professional.