Australians or Permanent residents: do not forget to include your foreign income!
If you are an Australian or a permanent resident for tax purpose, you are taxed on your worldwide income. This means you must declare all your foreign income in your Australian tax return, including income from:
- interests in foreign entities
- overseas properties you rent out
- capital gains on overseas assets
If you have paid tax on your income in another country which has a tax bilateral agreement which provides relief from a double taxation, you can claim a foreign income tax offset in your Australian tax return.
Differences between the Australian and foreign tax systems may mean you pay foreign income tax in a different income year from that in which the income or gain is included in your assessable income for Australian income tax purposes. You could have paid the foreign tax in an earlier or later income year. However, the offset can only be claimed after the foreign tax is actually paid.
- Benefit of having a Tax Agent:
If you register with a Tax Agent before 31st of October, you will be granted an extension for lodgement for your Australian tax return until the 15th of May of the following year.
In that case, you will be able to claim a foreign income tax offset if the tax paid overseas occurs after 30/06 caused by the difference of closing financial year in the other country.
- Useful to know:
- If you are currently holding a temporary visa (eg. visa 457), you can claim a special exemption on your overseas passive income such as rental income or dividends.
Under this regime, you are not required to include overseas income into your Australian tax return unless they are related to a foreign employment for services performed in Australia.
These passive incomes remain taxable in the original source country.
- Since the 1st of July 2008, you can deduct your foreign tax losses on your Australian income. If the foreign loss is not used, it may be carried forward indefinitely to offset any future income derived, regardless of whether the future income is sourced from Australia or otherwise.
- When you calculate your income and deductions, you must convert all your foreign income, foreign deductions and foreign tax paid into Australian dollars according to the exchange rate provided by the Australian Taxation Office.
Remember: Do not under estimate the Australian Taxation Office which has exchange of information arrangements with overseas government bodies and processes a lot of international data cross-matching all around the world!