If you’re classified as an Australian resident for tax purposes and currently work overseas, you’re required to report all of your foreign employment income each year on your tax return. This includes both your assessable and exempt income, regardless of any tax being taken out in the country in which you earned it. It also includes your salary, wages, bonuses, commissions and any allowances along with your income from either an overseas or Australian employer.
Tax Exempt/Tax Free Foreign Employment Income
If you’re a member of the Australian Defence or Police force, or engaged with overseas aid work, it’s possible that your foreign employment income is tax exempt or tax free.
While that might be the case, the ATO still requires MOST income earned overseas to be reported on your tax return. There are exceptions but it can be difficult to determine if your income falls within the exception areas. It is always best to inform your accountant and they can advise whether it needs to go on the return.
How to Report Foreign Employment Income
It’s important to note the amount of foreign employment income you declare on your tax return should be the amount you earned before tax was with withheld. This is called “grossing up” and helps determine your total assessable foreign employment income.
For example: Jennifer lived in Canada from 25th October 2014 to 29th March 2014 and worked for a ski season at a mountain resort. Jennifer earned $12,500 after tax. She also paid $3,500 worth of tax. Jennifer would therefore have foreign employment income to declare of $16,000.
Getting Foreign Employment Income Right
Foreign employment income can be a tricky section of your tax return to get right. Ensuring you declare the right amount on your return as well as any foreign employment income tax offsets you’re entitled to, is important to ensure your tax return is correct and that you’re in the best position financially.
If you’re not sure on any aspect of foreign employment income give us a call on 1300 693 829 or email the team on [email protected].