Australian taxation on foreign income
If you’re an Australian resident, as well as declaring all your Australian income, you need to declare all your worldwide income too.
That could be particularly relevant if:
- you’ve migrated to Australia but retained assets or sources of income from the place you migrated from
- you’ve inherited income producing assets from deceased family overseas (such as a holiday home)
- you’ve been employed, or are currently employed, by an overseas employer.
Income you will need to declare in your tax return
- interest on overseas bank accounts
- foreign pensions
- rent derived from investment properties
- capital gains from disposing of foreign assets, such as investment properties
- employee share schemes from overseas
- all wages earned in other countries.
How does the ATO receive income information?
The ATO now receives income information electronically from third parties in Australia (such as banks) and tax authorities overseas, including most institutions that pay interest and dividends, as well as wages summaries from employers and pension payments. The Australian government also monitors information on funds moving in and out of Australia through its AUSTRAC system and shares the results with the ATO.
This information is used to match what is declared in tax returns. If the income declared is not the same as the income matched, the ATO may audit you.
What are there penalties for not declaring foreign income?
Penalties for failing to declare foreign income can depend on the degree of culpability the ATO determines, and will typically be between 25% and 95% of the tax avoided, plus over 9 per cent interest on unpaid tax for the period it has been not been declared.
Income denominated in another currency will need to be translated into Australian dollars for disclosure in your tax return.
If you’ve paid tax overseas on your foreign income, you will often be able to claim a tax offset for the foreign tax paid against your Australian tax. This prevents so-called double taxation.
Need help with your tax return?
If you need help or advice declaring your foreign income, use our office locator to find your nearest H&R Block office and book an appointment online today.