Australians are taxed on their worldwide income which must be declared in their tax returns.
Each of the following categories is included in foreign income and need to be declared during yearly tax returns.
- Income from employment and personal services
Income from work conducted and services provided outside of Australia should be declared as if they were earned within Australia. This may include: salary and wages, directors fees, consultancy fees, business income, and any other remuneration. There are circumstances in which a foreign salary is exempt, and individuals should discuss this with the ATO or refer to their website.
- Income from assets and investments
Any assets or investments and their relevant returns need to be declared as if they were in Australia. This may include: interest from bank deposits or bonds, dividends from shares, royalties from intellectual property, rental income from real estate, pensions, annuities and lump sums from managed funds, income streams from super funds, and some foreign government pensions.
- Capital gains on overseas assets
Upon selling an asset that you own overseas, you may have to pay Australian tax. In cases where you owned the asset prior to becoming an Australian resident, the asset is treated as being acquired at the time you became a resident. Similarly, if you cease being a resident, then the asset is treated as being disposed of at the time you cease residency. As this is a complex area of tax law, it is beneficial to keep appropriate records of the asset.
You will receive a foreign income tax offset if you have already paid tax in another country. In order to be eligible for the offset, you should have paid the tax overseas and have records to prove it has been paid.
