The Overseas Forces Tax Offset is a tax concession available to Australian Defence Force (ADF) members serving in approved overseas locations. It recognises the unique nature of overseas military service and the hardships associated with international deployment. The offset is claimed through the income tax return and can significantly reduce or eliminate income tax on deployment income.
Who Can Claim the Overseas Forces Tax Offset?
The offset is available to Australian Defence Force members (Army, Navy, Air Force) who:
- Served overseas in an approved area during the income year
- The service was on an eligible operation — that is, a specific operation approved by the relevant minister as qualifying for the offset
- The member was covered under an approved arrangement for the relevant period
Members of other government agencies (AFP, DFAT, APS) deployed overseas in a civilian capacity generally do not qualify for the Overseas Forces Tax Offset but may be entitled to other tax concessions depending on the nature and terms of their deployment.
What Does the Offset Apply To?
The Overseas Forces Tax Offset applies to overseas civilian income — that is, the income attributable to the period of eligible overseas service. It is not a blanket exemption on all income; it applies to income earned during the qualifying deployment period.
Where eligible, the offset can reduce income tax on deployment income to zero. The mechanism is that a full offset is provided against the tax that would otherwise be payable on the income derived during the overseas service period.
Income Tax Exemption vs Tax Offset
In some cases, ADF income earned during overseas service on specific operations is exempt from income tax entirely under section 23AB of the Income Tax Assessment Act 1936 (for service on certain United Nations operations or operations in declared war-like zones). This is different from a tax offset:
- Exemption: The income is not included in assessable income at all
- Offset: The income is assessable but the resulting tax is offset to zero
The distinction matters because exempt income still affects income-tested benefits (such as the private health insurance rebate and some family payments), whereas non-assessable non-exempt income does not.
Approved Areas and Operations
The ATO maintains a list of approved overseas areas and operations. Examples of deployment types that have historically qualified include:
- United Nations peacekeeping operations
- ADF contributions to named international operations (e.g., Operation Accordion, Operation Highroad)
- Other Australian Government-declared operational deployments
The list changes as new operations are declared and concluded. The ADF member’s unit will typically provide information about whether their specific deployment qualifies.
How to Claim in Your Tax Return
The Overseas Forces Tax Offset is claimed in the “Zone or overseas forces” section of your income tax return. You will need to:
- Identify the approved area and operation
- Enter the number of days of eligible overseas service
- Include any income derived during the overseas service period
The ADF provides members with a payment summary that identifies overseas service income separately. This assists in completing the return correctly.
Related Articles
- Zone Tax Offset Australia — Remote and Overseas Areas
- Low Income Tax Offset (LITO) — How It Works
- Tax Offsets hub
- Taxes hub
Frequently Asked Questions
I am an APS employee deployed overseas with ADF. Can I claim the offset? The Overseas Forces Tax Offset specifically applies to ADF members. APS employees or contractors deployed alongside ADF personnel are generally not eligible. However, depending on the terms of deployment, there may be other concessions available — a registered tax agent familiar with government deployment arrangements can advise.
Does the offset apply to allowances received during deployment? Operational allowances paid to ADF members during overseas service (such as Hardship Allowances) are typically included in the offset calculation if they are covered by the relevant declaration. Some allowances may be separately exempt under other provisions. The ADF payroll team and a tax agent can confirm which components of deployment pay qualify.
I did six months overseas and six months in Australia. How does the offset work? The offset applies only to the income earned during the overseas service period. You identify the income attributable to the deployment period and claim the offset against the tax on that portion of your income. The ATO’s calculation is based on the number of qualifying overseas service days as a proportion of the full year.
This article provides general tax information only. ADF tax rules can be complex and depend on the specific operation and deployment terms. For advice tailored to your situation, speak with a registered tax agent familiar with Defence force taxation. Find one through the Tax Practitioners Board register.