Avi Lipa

Do you earn income from overseas?

December is behind us and you may want to look back at any income you earned overseas.

Even though over 100 countries end their financial years in December, you may still need to declare any foreign income you earn and pay tax on it in Australia. The income you pay tax on depends on your residency for tax purposes. Generally, Australian residents are taxed on their worldwide income and foreign residents are taxed only on income from Australian sources.

If you're an Australian resident for tax purposes:

As an Australian resident for tax purposes, you must declare income you earn anywhere in the world on your Australian tax return. This is known as your worldwide income. This includes any foreign income you may receive from:

pensions and annuities
business activities
employment and personal services
assets and investments
capital gains on overseas assets

Your foreign income could be subject to double taxation if tax is withheld in the source country. To overcome this, Australia has a system of credits and exemptions and has signed tax treaties with more than 40 countries. This includes all our major trade and investment partners.

Refer to the Australian Government's information here for a list of countries that have income tax treaties with Australia.

If you are a foreign resident working in Australia:

As a foreign resident for tax purposes, you aren’t entitled to the tax-free threshold, so you will pay tax on every dollar of income you earn in Australia. You need to declare any Australian-sourced income you earn in your Australian tax return. Your Australian-sourced income may include:

employment income
rental income
Australian pensions and annuities, unless an exemption is available under Australian tax law or a tax treaty
capital gains on Australian assets.

You generally don't need to declare income you receive from outside Australia in your Australian tax return.

Australia and Israel have signed a new tax treaty which, following its entry into force, will represent the first tax treaty between the two countries. This treaty has been in force since 2019 and also since then, Lynden Group has helped hundreds of our clients claim eligible foreign tax offset in their Australian tax returns, which also makes a significant contribution to their healthy cash flow.

Not just Israel, if you're earning income overseas and wondering if there's a treaty between Australia and the source country, feel free to let us know so we can help you out.