Residency for tax purpose – Part 10
How to Calculate your Assessable Foreign Income
All foreign income, deductions and foreign tax paid must be translated (converted) to Australian dollars before you complete your tax return. You can either use the exchange rates prevailing at specific times or an average exchange rate, depending on your circumstances. Foreign exchange rates are published monthly on the Tax office website.
Assessable foreign income is the total amount of any foreign income you earned which is not exempt from tax in Australia. If you had foreign tax taken away from this income, add it back to the amount you received.
Add all the income you received from foreign sources into a single amount.
Take away from this assessable amount any deductible expenses incurred in earning your foreign income.
Foreign source income also includes foreign pension and annuity, foreign employment income and foreign investment income (e.g. Interest, royalties, dividends, and rents) and capital gains on overseas asset. Prior to 1 July 2008, your foreign income was categorized on a class-of-income basis for tax purposes. From 1 July 2008, foreign income is calculated on a whole-of-income basis.
Foreign Pensions and Annuities
Most foreign pensions and annuities are taxable in Australia, even if tax was withheld from your payment by the country from which the payment came. You may claim a foreign income tax offset at this item if:
- The country from which your foreign pension or annuity came withheld tax from your payment
- You were not entitled to seek a refund of the foreign tax from that country, and
- The foreign pension or annuity is also taxable in Australia.
Investing in Overseas Property
Income from investments in overseas property is generally foreign source income. If you have earned income from an overseas property that is included in your assessable income, you must declare it in your Australian income tax return. If you have paid foreign tax in another country on that income, you may be entitled to an Australian foreign income tax offset, which provides relief from double taxation.
Rental and other rental-related income is the full amount of rent and associated payments that you receive, or become entitled to, when you rent out your property – whether it is paid to you or your agent. You must include your share of the full amount of rent you earn in your tax return.
Associated payments may be in the form of goods and services. You will need to work out the monetary value of these.
You must include as rental income any assessable amounts relating to limited recourse debt arrangements involving your rental property.