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Foreign and Worldwide income you need to declare

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Australian resident foreign and worldwide income

As an Australian tax resident, you must report all foreign income on your Australian tax return, which is termed as your worldwide income. This encompasses income from sources like pensions, annuities, business activities, employment, personal services, assets, investments, and capital gains from overseas assets.

If you’re involved with foreign entities or trusts, you might also have attributed foreign income, referring to income attributed to you but not yet distributed.

Income from employment and personal services, whether earned abroad or through foreign entities, must be declared. This includes salary, wages, directors’ fees, consultancy fees, business earnings, and payments received from overseas platforms like content creation or influencer work.

Similarly, income derived from overseas assets and investments, such as bank interest, share dividends, intellectual property royalties, real estate rentals, pensions, annuities, lump sums from managed funds, super fund income streams, and income from foreign entities, should be reported as if earned within Australia.

If you sell an overseas asset and trigger a capital gain, you might be subject to Australian capital gains tax. It’s vital to maintain accurate records, especially if the asset was acquired before or after becoming an Australian resident.

Regarding Australian tax on foreign and worldwide income:

  • Temporary residents might be exempt from Australian tax on most foreign income, except for specific overseas work during temporary residency.
  • Earning foreign income could lead to dual taxation, but paid foreign taxes might entitle you to an Australian foreign income tax offset.
  • Tax treaties might offer relief from double taxation through certificates of residency and overseas tax relief forms.

Tax exemptions apply to international employment income based on factors like foreign service, approved overseas projects, work for international organizations in Australia, Australian Defence Force deployments abroad, and joint projects with the United States.

When reporting, consider exchange rates and allocation of foreign income across tax years, as different countries may have varying year-end dates.

Remember, audits and verification checks occur, and accurate information is crucial to avoid penalties. Australia shares financial data with foreign tax authorities to ensure compliance, and failing to declare foreign income can lead to penalties and interest charges.

Foreign and temporary resident income

Income to Declare and Tax Implications for Foreign and Temporary Residents in Australia

Foreign Resident Income If you’re a foreign resident working in Australia, you need to report Australian-sourced income on your Australian tax return. This includes:

  • Earnings from employment
  • Rental income
  • Australian pensions and annuities (unless exempt under tax law or a treaty)
  • Capital gains from Australian assets.

Generally, income earned outside Australia doesn’t need to be declared, but if you have certain debts like Higher Education Loan Program (HELP), Trade Support Loan (TSL), or VET Student Loan (VSL), you might need to declare your global income.

You’re ineligible for the tax-free threshold, meaning all your Australian income is taxable. You’re also exempt from the Medicare levy, and an exemption can be claimed for the days you’re a foreign resident during the income year.

Foreign Resident Withholding Tax Foreign resident withholding tax applies to payments related to:

  • Casino gaming junkets
  • Entertainment and sports activities
  • Construction, installation, upgrading of buildings, and associated contracts.

Your payer deducts this tax, which you report on your tax return as a credit against your tax assessment.

Foreign Resident Deferred Withholding Tax Liabilities If you received Australian-sourced interest or dividends as a non-resident without tax withheld, you must declare this income in your relevant income tax return year. Certain withholding tax liabilities might be deferred if you meet specific criteria, extending the payment due date.

Temporary Resident Income Temporary residents generally don’t pay tax on overseas income unless they acquired shares or employee share scheme rights.

Temporary Resident Foreign Income Exemption Temporary resident Australian tax residents meeting specific criteria don’t pay tax on most foreign income. However, you’re taxed on employment or services income earned overseas while being a temporary resident. This income must still be declared in your tax return for the year earned. If you paid foreign taxes, you could claim a foreign income tax offset in your Australian tax return.

All foreign income, deductions, and tax offsets should be converted to Australian dollars for reporting in your tax return.


Tax exempt income from foreign employment

Employment income from certain types of international work may be exempt from Australian tax.

Exempt income from foreign service
Your income may be exempt from Australian tax (under section 23AG) if you’re engaged in foreign service.

Working on an approved overseas project
Your foreign income may be exempt from tax (under section 23AF) if you work on an approved overseas project.

Working for certain international organisations
Income from working for certain international organisations may be exempt from tax in Australia.

Australian defence force members performing overseas duty
Reporting income for members of the ADF performing overseas duty.

Australia-United States Joint Space and Defence Projects
How employment income in connection with a joint space and defence project may qualify for special tax treatment.

Your Tax Residency

Navigating Tax Residency in Australia

Whether you’re arriving in Australia or venturing abroad, understanding your tax residency is essential. Use residency tests to determine if you’re:

  1. An Australian resident for tax purposes
  2. A foreign or temporary tax resident.

Remember that tax residency doesn’t always align with immigration rules. Here’s what you need to know:

  • You can be an Aussie tax resident without citizenship or permanent residency.
  • Holding an Australian visa doesn’t automatically classify you as a tax resident.

Residency Tests

Several tests define your status:

  1. Resides Test: Living in Australia makes you an Aussie tax resident; no further tests are needed.

  2. Domicile Test: If your permanent home (domicile) is in Australia, you’re a resident unless your permanent abode is abroad.

  3. 183-Day Test: For arrivals, spending over half the year in Australia establishes residency unless your permanent abode remains elsewhere.

  4. Commonwealth Superannuation Test: Overseas Australian Government employees under certain schemes are considered residents.

Changing Residency

If your status changes during the year, mark ‘yes’ as an Australian resident on your tax return. This ensures proper taxation and the correct tax-free threshold based on residency duration.

Foreign residents can exclude days from their return. Post non-residency, foreign income isn’t reported; Australian income may face withholding tax.

Declare Higher Education Loan Program (HELP) or other loans for calculating worldwide income and repayment obligations.

Additional Considerations

  • Capital gains tax for foreign residents
  • Tax-exempt foreign employment income

For thorough details on tax residency, consult the Australian Taxation Office (ATO).

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