Reporting Foreign Income
At present, the ATO is seeking to ensure taxpayers report all sources of foreign income on their tax return.
Residency Status and Foreign Income
Your residency status affects the income you need to declare.
If for example, you are an Australian resident for tax purposes, you must declare all overseas income in your Australian tax return, even if you paid tax in the source country.
Foreign income includes:
- most pensions and annuities (fixed, regular payments)
- capital gains
- personal services income.
It is important to understand, that if you paid tax in the source country, you may be able to claim a foreign tax offset credit in Australia.
Foreign Revenue Authority
You may be contacted by the ATO if they receive information from a foreign revenue authority or other third parties, to indicate that you have received income from another country. Foreign income includes most pensions and annuities, interest, dividends, royalties, rent, capital gains and personal services income.
The Common Reporting Standard (CRS) gives the ATO access to financial data from over 65 foreign jurisdictions, which have committed to exchanging information with each other. Further, the ATO Assistant Commissioner, Karen Foat has reportedly said that with financial account information of more than 1.6 million offshore accounts, holding over $100 billion, now available to the ATO, attempting to hide income and assets offshore was pointless.
“If you’re an Australian resident for tax purposes, you are taxed on your worldwide income, so you must declare all of your foreign income no matter how small the amount may be. This may include income from offshore investments, employment, pensions, business and consulting, or capital gains on overseas assets,” Ms Foat said.
“Australians that deliberately move cash overseas in an attempt to hide it should be concerned. Hiding your assets and income offshore is pointless. ‘Tax havens’ are becoming a less effective model as international agreements improve transparency. You can no longer hide money behind borders.”
The ATO may also request further information from you if:
- you report a large amount of foreign losses; and,
- we have information from a foreign revenue authority or other third parties, indicating you may have received income from another country.
If you have any questions or need advice and clarity specific to your business, feel free to contact Semmens & Co on 03 8320 0320 for a free consultation.