Declaring foreign income in Australia
Are you living in the land down under, trying to get to grips with the tricky world of taxation?
Whether you're a student, expatriate, or just someone earning income from overseas sources, understanding your tax obligations is crucial.
After all, if you do not meet your tax requirements and file your return correctly, you may incur fines or penalties from the Australian Tax Office (ATO).
If you earned intaxable foreign income, you will need to declare it on your Australian tax return. Many foreign nationals and temporary visa holders in particular are unsure how to do this.
With that in mind, the Taxback team is here to guide you through the ins and outs of declaring foreign income in Australia!
In this guide, we'll cover everything from what constitutes foreign income to the taxation rules, reporting obligations, overseas tax credits, and the entire reporting process.
What is foreign income in Australia?
Essentially, foreign income includes any money you earn from sources outside of Australia.
This can encompass a wide range of earnings, but usually includes:
Income from overseas: If you worked abroad and earned a salary, these earnings fall under the category of foreign income.
Investment Income: If you earned money from any interest, dividends, or rent from overseas, these investments should be declared as foreign income.
Our average Australian tax refund is AU$2600
What is the foreign resident capital gains tax rate?
As a foreign or temporary resident in Australia, you are subject to CGT only on taxable Australian property, which can include real estate in Australia and any assets that are used to carry on a business within the country.
Currently, if you are a foreign resident for tax purposes, you can expect to pay up to 32.5% on the first $120,000. This is followed up by 37% on the next $60,000, and finally 45% from $180,001 onwards.
Australian residents can expect to be taxed at their marginal tax rate. Check out our free tax refund calculator for an estimate
If you end up becoming an Australian resident, or your temporary residency ends, the assets on which you pay CGT will change.
Taxation rules for foreign income in Australia
Australia operates on a worldwide income tax system, meaning that Australians are subject to tax on their worldwide income, which includes foreign income.
To be deemed a tax resident in Australia, you’ll need to meet certain criteria, which includes residing in Australia for a significant portion of the tax year.
Meanwhile, non-residents are typically taxed only on their Australian-sourced income, while their foreign income will not be subject to Australian taxation.
What happens if I don't include my foreign income on my tax return?
It’s vital that you file a tax return correctly as well as on time to ensure tax compliance if you have foreign income.
This is due to the fact that you could receive fines and penalties as well as interest charges if you do not declare the right amount of foreign income.
When is my Australian tax return due?
The Aussie tax season runs from 1 July – 30 June for individuals (however, businesses have to submit monthly and quarterly activity statements throughout the year).
The deadline for lodging a tax return if you don’t use a tax agent is 31 October.
Foreign income reporting obligations
Whether you are deemed a resident or a non-resident in Australia, if you are earning foreign income you will have specific reporting obligations to fulfill.
These obligations include:
Lodging a Tax Return: Anyone earning income in Australia must lodge an Australian tax return. You can do this easily with Taxback!
Declaring All Foreign Income: When you are filing your tax return, it's essential to declare all your foreign income, even if it's not taxable in Australia. This is so that the ATO has a clear record of your worldwide income.
Claiming Deductions: Non-residents can claim deductions related to their Australian-sourced income on their tax return, which in turn can help reduce their tax liability. It's essential to keep records of any expenses related to your income-earning activities in Australia.
If your home country has a tax treaty with Australia, you should understand the specific details of the tax treaty between Australia and your home country to determine your eligibility for these credits.
Do I need to file a tax return in Australia?
Most people who earn an income in Australia will need to file a tax return.
While you pay no tax on the first $18,000 of your income, you may still need to file a return.
It’s worth reaching out to a tax agent like Taxback if you are unsure whether you need to file a tax return.
Our average Australian tax refund is AU$2600
Who can help with my Australian taxes?
If you have earned foreign income while you were living in Australia, it is very important that you include this income on your tax return.
Whether you're a non-resident earning income from overseas sources or an Australian resident with foreign income, understanding the rules will ensure you stay on the right side of the tax authorities.
If you have any questions, you can always seek out a professional such as Taxback!
If you have any questions, you can use our live chat.
Alternatively you can also find out more about our Australian tax refund services.
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