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When you are earning foreign income (from overseas) and are an Australian resident, you need to declare this on your Australian tax return. While the ATO will be able to help you to determine if you qualify as an AU resident for tax purposes, we have compiled a range of information to help you get to grips with your tax requirements.
Types of foreign income that you should declare
There are three main categories that the types of foreign income eligible for declaration include, and these are as follows:
1. Income from employment and personal services
You will need to declare all relevant income that was earned, either from working overseas or by providing services remotely to an organisation outside of Australia, just as you would if it were earned nationally. This may include any wages or salary earned, consultancy fees, business income, director’s fees and more.
There may be circumstances where foreign salary could be exempt from AU taxation however, so be sure to check with us.
2. Income from assets and investments
Overseas assets and investments should also be considered as if they were in Australia when it comes to tax – and therefore all relevant returns should be declared at the end of each tax year. Interest from overseas bank deposits or bonds, royalties from intellectual property, rental income from real estate, dividends from shares and even pensions, annuities and lump sums from managed funds (as well as certain foreign government pensions) can all be eligible for AU tax.
3. Capital gains on overseas assets
While this may be a complex section of taxation law, capital gains and overseas assets should not be overlooked. There are likely to be a range of exemptions, but in general you should be aware that selling an asset that you own overseas could mean that you need to pay tax on the amount received. Be sure to keep clear and concise records of the original and ongoing value of the asset, as well as any applicable transactions (such as details of sale).
There are likely to be instances where you will have paid tax in the country where the income was derived, but that doesn’t mean that you will be exempt from payment in Australia. Instead, you may be eligible for foreign income tax offset credit.