There are different ways you can earn a foreign income. These earnings could come from:
- Income earned, whether full time or part time
- Business income
- Capital gains on holiday homes and other overseas assets
- Other (pensions, annuinities)
In all cases the amount of tax and when it is payable will depend on the country in which you have worked. There are some exemptions, such as foreign services with the defence force. For more information on exemptions, check the ATO website.
Foreign Income Tax Offset
If you have already paid tax in the foreign country that you earned your income then you may be eligible for an Australian foreign income tax offset. This helps you avoid paying tax twice.
To be entitled to this offset you will need to have already paid taxes overseas, and this information needs to be stated in your assessable income on your Australian tax return. It cannot be claimed before you have paid your foreign tax.
Record keeping for your tax return
You must keep accurate receipts and records if you plan on making a claim for a tax offset for your foreign income.
These records must show how much foreign income you have earned and how much tax you paid on this income.
Calculating your foreign tax offset
For foreign income less than $1000 - you need only note how much tax you paid.
For foreign income more than $1000 - you will need to calculate your tax offset limit
If the subject of tax seems foreign, get in touch with an ITP tax specialist for help with your foreign tax return at your nearest ITP Business Centre or Mall.