Let’s dive into foreign resident reporting in Australia.
What is Foreign Tax Resident Reporting? Australia, like many other countries, has committed to new global standards for the automatic exchange of financial account information. Financial institutions worldwide are required by law to collect this information and report it to tax authorities. The goal is to ensure that everyone pays the correct amount of tax. Here’s how it works:
- Foreign Account Tax Compliance Act (FATCA): For US citizens and tax residents, Australia exchanges information with the United States under FATCA. This has been in effect since July 1, 2014.
- Common Reporting Standard (CRS): The CRS applies to all foreign tax residents. Since July 1, 2017, Australian financial institutions must identify accounts held by customers who are foreign tax residents or entities connected to foreign tax residents. They then report these accounts to the Australian Taxation Office (ATO), which, in turn, shares the information with foreign tax authorities.
Existing Accounts: If you already have an account, your financial institution may contact you to confirm your country or countries of tax residence. This helps them determine whether your account needs to be reported under FATCA or CRS. If their records indicate that you could be a foreign tax resident (perhaps because you provided an address outside Australia), they’ll reach out to you.
Opening a New Account: Since July 1, 2017, when you open a new account, your financial institution will ask you to certify your tax residence. Most types of financial accounts fall under this requirement. If you’re a foreign tax resident, you’ll need to provide your tax identification number (TIN) or its equivalent. This number identifies you to the tax authority in your home country. If you don’t have one, they’ll ask for a reason.
Remember that as a foreign resident for tax purposes in Australia:
- You don’t get the tax-free threshold, so all your income is taxed.
- You must declare all income earned in Australia, including employment income, rental income, Australian pensions, annuities, and capital gains on Australian assets.
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