8 Things You Don’t Want To Forget This Tax Time – #5

You may earn your income in more ways than just from your job and ignorance is not an excuse from the ATO. There are many ways people may make an income and it all adds to your taxable income.

Foreign income

Australia is a proud multicultural country and is open to many international streams of income. Residents often work overseas and many overseas residents are accepted to work in Australia on visas. Many love this country so much, they stay – but their income remains overseas. 

If you’re travelling, taking a working holiday or decide to stay, worldwide foreign income earned as an Australian resident (for tax purposes) is taxable and should be declared in your tax return.

There are many forms of foreign income

Foreign income can include:

  • salary and wages
  • directors fees
  • consultancy fees
  • business income
  • any other remuneration
  • pensions and annuities
  • business income
  • employment and personal services income
  • assets and investment income – including offshore bank accounts
  • capital gains on overseas assets
  • interest from bank deposits or bonds
  • dividends from shares
  • royalties from intellectual property
  • rental income from real estate
  • pensions, annuities and lump sums from managed funds
  • income streams from super funds
  • some government pensions
Things you should not forget this tax season

Intricate tax laws to prevent double taxing

The laws governing foreign income can be quite intricate and it all must be declared when you lodge your tax return. You may or may not have to pay tax, but it will affect other things like your tax offsets, or other government benefits you’re entitled to receive.

Income earned overseas may be taxed by the country from which it was earned, however you will still need to include the gross income before foreign tax when you lodge your return. The foreign tax can be claimed as a credit or offset your tax payable to prevent double taxing. If you have foreign income that you have not disclosed, you may be liable to penalties and interest charges.

READ PART 6 – 8 THINGS YOU DON’T WANT TO FORGET THIS TAX TIME

Tax offsets

You must satisfy certain criteria to be eligible for a foreign tax credit if you have paid tax on the income overseas and have records to back your claims. If you’re not an Australian resident for tax purposes, you are only taxed on your Australian-sourced income, so you generally don’t need to declare income you receive from outside Australia in your Australian tax return.

Australian dollars

It pays to remember that foreign income is converted into Australia dollars and tax offsets applied in Australian dollars. The differences in financial years in other countries may be different to the Australian financial year. You may need to report multiple tax returns when you lodge your claim.

There’s no doubt that lodging a tax return can be complex, especially when several streams of income need to be declared. Tax agents are fully certified accountants who have specialised in tax law. They understand the latest changes and what you need to include on your return – even if you don’t. All ITP Income Tax Professionals are registered with the Tax Practitioners Board of Australia. Book an appointment and speak to a professional today.

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Want to know more?

Read Top Tax Income Stream Part 1

Read Top Tax Income Stream Part 2

Read Top Tax Income Stream Part 3

Read Top Tax Income Stream Part 4

Read Top Tax Income Stream Part 6

Read Top Tax Income Stream Part 7

Read Top Tax Income Stream Part 8