Foreign income tax return: What is it? Questions Answered

 Foreign income is when you receive income sourced from overseas while you are living in Australia. Foreign income includes income from employment, business, bank interest, rental income or other such incomes. All of these circumstances give rise to a situation where you would need to lodge a foreign income tax return. Some of the commonly asked questions regarding a foreign income tax returns have been answered below for you.

What is foreign income? What is a foreign income tax return?

If you receive foreign employment income, foreign business income, capital gains on overseas assets, foreign rental income, foreign pensions and annuities; then you are earning foreign income. Australian Transaction Reports and Analysis Centre (AUSTRAC) monitors the money in and out of Australia and supplies information to the ATO of the taxpayers receiving foreign income. In addition, the ATO also obtains information from foreign banks of bank accounts held overseas through its sophisticated data matching system.

What is double taxation?

Double taxation means that income taxes are paid twice on the same source of income. To avoid double taxation, Australia has established tax treaties with more than 40 countries. This is a formal agreement between two nations through a bilateral tax arrangement – Double Taxation Avoidance Agreement (DTAA). Different countries have different tax rates, taxation rules and financial years. The income tax paid overseas generally can cover the tax payable in Australia. However, the excess foreign tax paid overseas is not refundable in Australia.

What is foreign income tax offset?

A tax offset relieves a taxpayer from paying tax on the same income in two countries. Generally, to be able to claim a tax offset, the taxpayer must have lodged their income tax return in the foreign country and paid their foreign taxes. There are also certain circumstances in which the foreign income tax paid is not qualified for a tax offset. Therefore, it is important for every taxpayer receiving foreign income to be aware of their tax obligations in Australia.

We can assist you calculating your assessable foreign income, calculating the tax offset and preparing foreign income tax return. Feel free to call us on 0452214559 for a no obligation phone call or email us at info@ps-accountants.com.au.