Did you know the ATO requires an Australian resident to declare all income on your tax return? It includes the Australian income you have earned and any foreign income or worldwide income you may have received.
The ATO has specific guidelines, and every resident earning money from outside the country must abide. So, if you earn from international sources, here is a tax guide.
Foreign incomes you must declare
As per the ATO, foreign income from the following sources must be declared in your Australian tax return.
- Capital gains on overseas assets
- Income from investments and assets
- Income from personal and employment services
In other words, foreign income is also called worldwide income.
Capital gains on overseas assets
For this sort of income, there are some rules that you need to understand. Capital gains tax applies when you decide to sell your overseas asset.
You would be utterly wrong if you thought you would be exempted from paying this tax if you acquired the asset before becoming a resident. In Australia, every overseas asset you own prior to becoming a resident is treated as if you owned it after becoming a resident.
Similarly, if you sell an overseas asset after you stop being an Australian citizen, you have to pay the CGT. In this instance, it will be treated as if you disposed of the asset right when you stopped being a resident, not after it.
Thus, there is no way you can escape from paying CGT. To make things easier, keep an accurate record of everything regarding the asset.
Income from personal and employment services
Tax on foreign income for Australian residents employed outside the country is also mandatory. Here’s what you need to declare:
- Salary and wages
- Consultancy fees
- Business income
- Directory fees
- Other remunerations
This tax also applies to the payments you receive from those platforms which are hosted in other countries. For instance, the content creator who received payment from a foreign platform must declare it.
Income from investments and assets
All your investments and assets outside of Australia must be declared as if they were in the country. The same goes for the offshore accounts as well. These include:
- Income streams from super funds
- Interest from bonds or bank deposits
- Royalties from intellectual property
- Dividends from shares
- Rental income from real estate
- Some government pensions
- Annuities, lump sums and pensions from managed funds
How much foreign income is tax-free in Australia? There are limited circumstances under which you may get an exemption. However, it would be best to verify beforehand because these are uncommon. You can also ask a foreign-owned income tax accountant to determine whether you will get a tax exemption on foreign income.
What if you have already paid the tax in the other country?
In case you have paid the tax in the country you earned it from, you may get a foreign income offset credit. But there are still some requirements for it as well. You must have paid the tax and carry the records as proof. Please remember that you will not always get the same amount of tax as the offset.
To know more about foreign income and tax, reach out to Clear Tax Accountants. We have a team of qualified and experienced accountants who can handle all your accounting needs with efficiency and accuracy. Whether you need a simple tax consultation or a comprehensive financial solution, we can tailor our services to suit your specific situation and goals.
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