Digital Nomad
Digital Nomads & Foreign Employment Income: Navigating Sections 23AF/23AG in Australia
For remote workers, cross-border contractors and digital nomads: learn when your foreign employment income may be exempt under Aussie tax law and how to structure your work to reduce compliance risk.
By NomadicTax Research Team • 5-8 min read • May 13, 2026
## What are Sections 23AF and 23AG?
- **Section 23AF**: Deals with income earned working on an *approved overseas project*. If you work outside Australia continuously for **91 days or more** on a project approved by Austrade or prescribed authority, and meet other conditions, your income may be **exempt** from Australian tax. ([ato.gov.au](https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/income-you-must-declare/foreign-and-worldwide-income/tax-exempt-income-from-foreign-employment/working-on-an-approved-overseas-project?anchor=Nonexemptionconditions&utm_source=openai))
- **Section 23AG**: Applies to certain foreign employment income. It allows exemption under specified circumstances for an Australian resident. ([ato.gov.au](https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/engaging-a-worker/in-detail/foreign-employment-income-and-section-23ag-employers?utm_source=openai))
## Who can benefit?
- Digital nomads working with international entities or projects outside Australia for sustained periods.
- Remote workers employed by Australian entities but performing work offshore.
- Contractors engaging in overseas projects approved by Government.
- Employers hiring Australian residents working overseas continuously.
## Practical steps & examples
- **Check eligibility**: Is the project “approved overseas”? Was employment continuous for at least 91 days? Are your activities of a type covered (e.g. supplying equipment, construction, administrative services)? If yes — could apply for a **foreign income exemption**. ([ato.gov.au](https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/income-you-must-declare/foreign-and-worldwide-income/tax-exempt-income-from-foreign-employment/working-on-an-approved-overseas-project?anchor=Nonexemptionconditions&utm_source=openai))
- **Use class variation**: If you employ several people abroad in similar circumstances, you can ask for a variation to withhold less tax up front. This reflects that you expect low or no Australian tax after exemptions. ([ato.gov.au](https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/engaging-a-worker/in-detail/foreign-employment-income-and-section-23ag-employers?utm_source=openai))
**Example**: Mia, an Australian resident, is contracted for a six-month building project in Fiji that's approved by Austrade. Since her service is ≥91 days, and the project qualifies, her income under section 23AF is exempt. She still needs to show it on her tax return, but she may be able to arrange for withholding sureties via class variation, reducing upfront tax withheld.
## Compliance: what to disclose, and records to keep
- Even when foreign income is exempt, you must **declare it in your tax return**. The ATO uses this info to calculate taxable rates and offsets. ([ato.gov.au](https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/income-you-must-declare/foreign-and-worldwide-income/tax-exempt-income-from-foreign-employment/working-on-an-approved-overseas-project?anchor=Nonexemptionconditions&utm_source=openai))
- Keep detailed documentation: project approval reference, duration of work, travel records, contracts, employer’s information.
- Track foreign tax you paid: If you paid tax overseas, may claim foreign tax offset where relevant.
## Risks & limitations
- Not all foreign income is exempt; some project types are excluded.
- If absences (from geographical work) exceed 1/6 of service, continuous qualification may be broken. ([ato.gov.au](https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/income-you-must-declare/foreign-and-worldwide-income/tax-exempt-income-from-foreign-employment/working-on-an-approved-overseas-project?anchor=Nonexemptionconditions&utm_source=openai))
- Working across multiple jurisdictions: double tax treaties, foreign law could affect treatment.
## Actionable insights
- Before accepting overseas roles or extending remote work, check whether the project qualifies under section 23AF or 23AG.
- Negotiate contracts that allow employer cooperation with class variation or employer withholding aligned with actual tax outcome.
- Maintain clear travel, service, and project documentation to support claims.
For digital nomads: understanding your resident status, the nature of your work abroad, and these sections can translate into meaningful tax savings — but only with proper compliance and documentation.