5331.0 - Balance of Payments and International Investment Position, Australia, Concepts, Sources and Methods, 1998  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 22/09/1998   
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Contents >> Chapter 8. Current account - income >> Compensation of employees

8.5. Compensation of employees comprises wages, salaries and any other benefits (including employers’ contribution to social security and pension funds, and payments in kind) for work performed by individuals, where the employee is a resident of one economy and the employer is a resident of another. Compensation of employees should be recorded on a gross basis, before the deduction of income taxes, and may be earned (i) by persons working in an economy, other than the one where they are normally resident, for less than twelve months; or (ii) by local staff from employment in foreign diplomatic missions and military establishments. Such establishments are regarded as non-resident entities, although physically located within the host country; they are also referred to as extraterritorial entities.

8.6. Where persons are working abroad for twelve months or more, they cease to be regarded as residents of their home economy and are treated as residents of the economy in which they work. Therefore, earnings by foreign workers, in a country for twelve months or more, are transactions between a resident worker and a resident employer and are not measured in the balance of payments. Where such foreign workers remit funds to family abroad, such transfers are included in workers’ remittances in private transfers. An exception is made for foreign students, who, should their centre of economic interest be regarded as remaining in their country of origin, continue to be residents of their home country irrespective of their length of stay; any wages and salaries earned by them are included in compensation of employees.


8.2
INCOME: STANDARD COMPONENTS (a)
Compensation of employees

Investment income

Direct investment abroad (in Australia)
Income on equity
Dividends and distributed branch profits
Reinvested earnings and undistributed branch profits
Income on debt
Receivable on claims on affiliated enterprises (direct investors)
Payable on liabilities to affiliated enterprises (direct investors)
Portfolio investment assets (liabilities)
Income on equity
General government*
Depository corporations
Other sectors
Income on debt
Bonds and notes
Reserve Bank*
General government
Depository corporations
Other sectors
Money market instruments
Reserve Bank*
General government
Depository corporations
Other sectors
Other investment assets (liabilities)
Reserve Bank
General government
Depository corporations
Other sectors

(a) Debit and credit entries apply to most of the standard components.
Components marked with an asterix (*) only relate to credit entries.
The text in brackets is used to indicate where debit labels differ from credit labels.

8.7. Income taxes accruing to host governments from the earnings of foreign workers should be recorded in general government transfers, while the income taxes accruing to foreign governments from residents working abroad should be recorded in other transfers of other sectors. However, data sources used to capture the earnings of foreign workers (such as the International Visitor Survey and the Survey of Returned Australian Travellers) are only likely to measure wages and salaries earned after deducting income tax. Therefore both the compensation of employees and current transfers will have offsetting understatements in their measurement in the Australian balance of payments.





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