Blog Layout

ATO sets its sights on undisclosed foreign income
Liz Gibbs • January 22, 2020

Do you have any amounts of offshore income you haven't declared to the ATO – perhaps interest from a foreign bank account? Even if it seems like a small amount, you must declare it. International data-sharing arrangements are making your overseas financial affairs increasingly transparent, so don't get caught out. Find out how foreign income is taxed and what you need to do.

The ATO is reminding taxpayers about their obligation to report foreign income, and it's keen to emphasise that its techniques for detecting offshore amounts are becoming increasingly effective. Cross-border cooperation between different tax jurisdictions means your financial information is being shared more than ever before – increasing the odds of your affairs being uncovered by the ATO.

Failing to report foreign income can attract penalties and ATO scrutiny of your broader tax affairs. Got any amounts you've overlooked? Now is a great time to get help from your tax adviser with making a disclosure.

How is foreign income taxed?

If you're an Australian resident for tax purposes, you're taxed on your worldwide income. This means you must declare all foreign income sources in your return. You should consider whether you've earned any amounts from:

  • investments held overseas, such as dividends, rental income from properties and interest from bank deposits;
  • overseas pensions;
  • overseas employment, including salary and directors' fees; and
  • the sale of offshore assets (ie capital gains).

What if you've already paid tax on the income overseas? You still need to declare it to the ATO. However, you may be able to claim an offset for the tax already paid in order to prevent double taxation.

It's a good idea to get assistance from a tax professional when declaring foreign income. All figures must be converted to Australian dollars according to particular exchange rate rules, and you may also need to apportion amounts that were earned in countries that don't have an income year ending 30 June. Your tax adviser can also help you calculate your available offset for foreign tax already paid, which is subject to a certain limit if your claim exceeds $1,000.

Are you a "resident"?

You're only taxed on your foreign income if you're an Australian resident for tax purposes. If you're a non-resident, you generally only pay tax on your Australian-sourced income.

Being an Australian resident for tax purposes is different to immigration concepts of residency, and your nationality is generally not relevant. So even if you aren't an Australian citizen or permanent resident, you could be a resident for tax purposes.

The main test for tax residency is whether you "reside" in Australia. There's no single factor that determines whether you meet this test.

Instead, it requires a weighing up of all relevant circumstances, including things like your intentions, your family and living arrangements, business and employment ties, and so on.

However, even if you don't currently "reside" in Australia for tax purposes, you may still be a resident for tax purposes under several alternative tests (including where both your "domicile" and permanent place of abode are maintained in Australia). Seek professional advice if you're in any doubt about your tax residency status.

Making a voluntary disclosure

If you think you may have omitted some foreign income from a previous tax return, you can make a voluntary disclosure to the ATO and pay any tax you owe. You'll often receive a reduction in ATO penalties and interest that would otherwise apply – and the outcome is generally much more favourable if you make this disclosure   before   the ATO commences an audit of your tax affairs. Given the ATO's increased powers to detect offshore amounts, taxpayers with unreported income should think seriously about the benefits of proactive disclosure.

Unsure about your foreign income?

Contact our office if you have any questions about tax residency, foreign income or making a voluntary disclosure. We'll help you navigate the rules to ensure your offshore financial affairs are sorted.

Email us at Robert Goodman Accountants at 
.  © Copyright 2020
 
Thomson Reuters. All rights reserved.
 
Brought to you by Robert Goodman Accountants.
Office open
By Liz Gibbs March 10, 2025
With thanks to all Energex and Emergency services Crew, our electricity has been reconnected and our office is open from today 11 March. We hope you and your loved ones are safe and well following cyclone Alfred. These past few days have been challenging for many, and our thoughts are with everyone affected.
By Liz Gibbs March 10, 2025
Due to a power outage affecting the entire Samford area, the RGA Practice will be operating remotely today, 10 March, until electricity is restored. Please be assured that our team remains available and can be reached at 07 3289 1700. We appreciate your understanding and support during this time. Stay safe, and we look forward to seeing you soon.
Cyclone Alfred
By Liz Gibbs March 5, 2025
As Tropical Cyclone Alfred approaches, we want to remind everyone to take necessary precautions and ensure their safety. We have received some important information that we believe is crucial to share with you to help you prepare for the severe weather conditions ahead.
Work Health and Safety (Sexual Harassment) Amendment Regulation 2024
By Liz Gibbs February 26, 2025
In a significant move to combat workplace sexual harassment, Amendments to the Work Health and Safety Regulation 2011 (as per the Work Health and Safety (Sexual Harassment) Amendment Regulation 2024) will soon commence on 1 March 2025.
By Liz Gibbs February 25, 2025
The amount of money that can be transferred to a tax-free retirement account will increase to $2m on 1 July 2025.
What happens to your super when you die?
By Liz Gibbs February 25, 2025
The Government has announced its intention to introduce mandatory standards for large superannuation funds to, amongst other things, deliver timely and compassionate handling of death benefits. Do we have a problem with paying out super when a member dies?
By Liz Gibbs February 25, 2025
If credit card surcharges are banned in other countries, why not Australia? We look at the surcharge debate and the payment system complexity that has brought us to this point. In the United Kingdom, consumer credit and debit card surcharges have been banned since 2018. In Europe, all except American Express and Diners Club consumer surcharges are banned. And in Australia, there is a push to follow suit. But, is the issue as simple as it seems?
Babyboomer wealth
By Liz Gibbs February 25, 2025
“Succession planning, and the tax risks associated with it, is our number one focus in 2025. In recent years we’ve observed an increase in reorganisations that appear to be connected to succession planning.” ATO Private Wealth Deputy Commissioner Louise Clarke.
Penalty for False R&D claims
By Liz Gibbs February 25, 2025
A joint investigation involving the ATO found that, between 2014 and 2017, a Sydney business coach promoted unlawful tax schemes encouraging clients to lodge over-inflated, inaccurate or unsubstantiated research and development ('R&D') tax incentive claims
SMSF lodgement due dates
By Liz Gibbs February 25, 2025
All trustees of SMSFs with assets (including super contributions or any other investments) as at 30 June 2024 need to lodge an SMSF annual return ('SAR') for the 2023/24 financial year.
More Posts
Share by: