Foreign Income

What are your tax obligations?

Understanding​ ​foreign​ ​income​ ​and​ ​your​ ​tax​ ​obligations​ ​as​ ​an​ ​Australian​ ​resident​ ​is​ ​paramount to​ ​ensuring​ ​that​ ​you​ ​do​ ​not​ ​face​ ​hefty​ ​penalties​ ​come​ ​tax​ ​time. If​ ​you’re​ ​an​ ​Australian​ ​Resident​ ​Taxpayer​ ​earning​ ​income​ ​from​ ​overseas,​ ​you’ll​ ​want​ ​to​ ​listen up.​ ​​ ​And​ ​in​ ​the​ ​wise​ ​words​ ​of​ ​Alanis​ ​Morissette,​ ​there’s​ ​one​ ​big​ ​thing​ ​​you ​oughta ​know.

Essentially,​ ​your​ ​global​ ​income​ ​MUST​ ​be​ ​reported​ ​as​ ​part​ ​of​ ​your​ ​annual​ ​tax​ ​obligations.​ ​​ ​While earning​ ​money​ ​from​ ​overseas​ ​as​ ​an​ ​Australian​ ​resident​ ​is​ ​completely​ ​above​ ​board,​ ​there​ ​are​ ​a few​ ​factors​ ​to​ ​keep​ ​in​ ​mind.​ ​​ ​And​ ​we’re​ ​here​ ​to​ ​lay​ ​them​ ​out​ ​on​ ​the​ ​table​ ​for​ ​you. Who​ ​Needs​ ​To​ ​Declare​ ​Foreign​ ​Income? This​ ​information​ ​is​ ​particularly​ ​crucial​ ​for​ ​Australian​ ​residents​ ​who: ● Have​ ​inherited​ ​or​ ​are​ ​lending​ ​money​ ​from​ ​a​ ​relative​ ​overseas*

● Have​ ​assets,​ ​such​ ​as​ ​a​ ​house,​ ​in​ ​another​ ​country

● Earn​ ​an​ ​income​ ​from​ ​an​ ​overseas​ ​contract​ ​or​ ​employer *We​ ​have​ ​a​ ​horror​ ​story​ ​or​ ​two​ ​about​ ​this​ ​one. A​ ​Mother,​ ​who​ ​was​ ​living​ ​in​ ​New​ ​Zealand,​ ​loaned​ ​money​ ​to​ ​her​ ​Australian-based​ ​daughter​ ​to buy​ ​a​ ​house​ ​with​ ​loan​ ​agreements​ ​drawn​ ​up,​ ​the​ ​whole​ ​lot.​ ​​ ​But​ ​because​ ​the​ ​Fund​ ​came​ ​from​ ​a NZ​ ​Trust​ ​rather​ ​than​ ​her​ ​own​ ​name,​ ​you​ ​guessed​ ​it,​ ​the​ ​ATO​ ​have​ ​claimed​ ​it​ ​should​ ​have​ ​been part​ ​of​ ​her​ ​tax​ ​return​ ​and​ ​assessed What​ ​Needs​ ​To​ ​Be​ ​Declared​ ​as​ ​Foreign​ ​Income?

If​ ​you​ ​are​ ​an​ ​Australian​ ​resident​ ​for​ ​tax​ ​purposes,​ ​all​ ​foreign​ ​income​ ​is​ ​required​ ​to​ ​be​ ​reported as​ ​part​ ​of​ ​your​ ​tax​ ​return.​ ​​ ​This​ ​income​ ​includes: ● Rent​ ​paid​ ​to​ ​you​ ​for​ ​overseas​ ​properties

● Interest​ ​on​ ​overseas​ ​bank​ ​accounts

● Foreign​ ​pensions

● Foreign​ ​business​ ​income

● Wages​ ​earned​ ​from​ ​an​ ​overseas​ ​employer

● Money​ ​inherited​ ​or​ ​loaned​ ​from​ ​a​ ​family​ ​member​ ​overseas​ ​–​ ​You​ ​saw​ ​above​ ​how​ ​​not ​ ​​ to do​ ​it…​ ​​ ​So,​ ​speak​ ​to​ ​us​ ​before​ ​you​ ​do​ ​and​ ​make​ ​sure​ ​it's​ ​transferred​ ​correctly

Why​ ​Do​ ​You​ ​Need​ ​To​ ​Declare​ ​Foreign​ ​Income?

While​ ​your​ ​intentions​ ​may​ ​be​ ​harmless,​ ​the​ ​ATO​ ​is​ ​knuckling​ ​down​ ​on​ ​foreign​ ​income​ ​and​ ​does, in​ ​fact,​ ​receive​ ​this​ ​foreign​ ​income​ ​information​ ​from​ ​third​ ​parties​ ​such​ ​as​ ​banks,​ ​AUSTRAC​ ​and other​ ​overseas​ ​tax​ ​authorities.​ ​​ ​So​ ​if​ ​your​ ​reported​ ​income​ ​does​ ​not​ ​match​ ​their​ ​records, chances​ ​are,​ ​you’ll​ ​be​ ​contacted.

What​ ​Are​ ​The​ ​Penalties​ ​For​ ​Not​ ​Declaring​ ​Foreign Income?

Penalties​ ​for​ ​not​ ​claiming​ ​foreign​ ​income​ ​as​ ​an​ ​Australian​ ​resident​ ​are​ ​pretty​ ​substantial,​ ​so​ ​it’s important​ ​that​ ​you​ ​know​ ​the​ ​cold​ ​hard​ ​facts.​ ​​ ​We​ ​mean,​ ​why​ ​not​ ​declare​ ​foreign​ ​income correctly​ ​and​ ​keep​ ​your​ ​pennies​ ​in​ ​your​ ​pocket​ ​instead​ ​of​ ​handing​ ​them​ ​over​ ​to​ ​the​ ​ATO? Depending​ ​on​ ​your​ ​interactions​ ​with​ ​the​ ​ATO,​ ​the​ ​financial​ ​penalties​ ​for​ ​not​ ​declaring​ ​your foreign​ ​income​ ​as​ ​an​ ​Australian​ ​resident​ ​can​ ​range​ ​from​ ​25%​ ​to​ ​150%​ ​of​ ​the​ ​undeclared​ ​tax,​ ​it will​ ​include​ ​a​ ​Penalty​ ​also​ ​and​ ​on​ ​top​ ​of​ ​this​ ​9%​ ​interest​ ​on​ ​unpaid​ ​tax​ ​which​ ​hasn’t​ ​been​ ​paid.

More​ ​Information​ ​About​ ​Foreign​ ​Income

In​ ​some​ ​instances,​ ​you​ ​may​ ​be​ ​taxed​ ​for​ ​foreign​ ​income​ ​in​ ​Australia​ ​and​ ​also​ ​from​ ​the​ ​country you​ ​received​ ​the​ ​income.​ ​​ ​In​ ​this​ ​case,​ ​you​ ​may​ ​be​ ​eligible​ ​to​ ​an​ ​Australian​ ​foreign​ ​income​ ​tax offset,​ ​which​ ​you​ ​can​ ​read​ ​more​ ​about​ ​on​ ​the​ ​​ATO​ ​website​. Exempt​ ​income,​ ​such​ ​as​ ​foreign​ ​income​ ​earned​ ​as​ ​a​ ​member​ ​of​ ​the​ ​Australian​ ​Defence​ ​Force or​ ​Police​ ​Force​ ​and​ ​overseas​ ​aid​ ​work​ ​must​ ​still​ ​be​ ​reported,​ ​despite​ ​these​ ​types​ ​of​ ​foreign income​ ​having​ ​special​ ​circumstances​ ​applied.

Still ​have ​questions about ​claiming ​foreign ​income ​as ​an ​Australian ​resident? ​Give us ​a ​call