An Australian resident is taxed on worldwide income making it an obligation for them to declare any foreign income when filing their taxes. Foreign income includes pensions and annuities, employment income, investment income, income from business operations, and capital gains from overseas assets. Irrespective of the fact that the income may have been taxed in the source country, it’s potentially subject to double taxation in Australia as well. The Australian government has signed tax treaties with more than 40 countries in order to overcome this. This also includes all major trade and investment partners.
Double Tax Agreements
Double tax agreements are negotiated to decide which country or territory has the first or sole right to tax specific types of income. This only happens if both countries or territories tax their residents on worldwide income.
An Australian is entitled to claim deductions for some expenses that are directly related to their earning income. To claim these deduction, one must have spent the money herself and weren’t reimbursed already for it, and the deduction must be related to the individuals’ job. This means there must be a record to prove it – though there are some limited exceptions.
The above is in the case of work related deductions. But if the expense happens to be both for work and private purposes, then one can only claim a deduction for the work related portion.
Employment income is money received from working. Employment income must be included on the tax return. Incomes received from pensions as super income stream, annuities or government payments must be declared. For super income stream, one needs to declare the taxed element and the untaxed element. Most annuities have both the taxable and the tax free component. Some government payments such as disability-support pension, child disability allowance, carer adjustment payment and the veterans’ affairs disability pensions and allowances are all exempted from tax but should be declared on the tax return.
As you can see, there a lot of things to consider with regards to foreign income tax for an Australian. To ensure that your tax is suitably prepared, contact Femia Accountants today as we are experts in foreign income tax for fellow Australians.
Contact our office today on 9316 4500 or book a time to meet with us.