Foreign income & expat tax

Residency for tax is decided on the facts, not just where you physically are. The ATO applies several tests, including whether your permanent home (domicile) is in Australia, whether you spent 183 days or more here, and the strength of your ongoing ties — family, housing, assets and intentions. Being a tax resident is different from your visa or citizenship status, and it is assessed for each income year. Because the outcome is fact-specific and can change year to year, residency should be reviewed for your particular circumstances rather than assumed from where you happen to be living.

Generally, if you are an Australian tax resident you are taxed on your worldwide income, so overseas salary, interest, dividends, distributions and rental income usually need to be declared in your Australian return — even if foreign tax was already paid on it. Non-residents are typically taxed only on Australian-sourced income, under different rules. Because the answer depends entirely on your residency position and the type of income, we work that out first before deciding what must be reported. This is general information only and not personal tax advice for your situation.

The foreign income tax offset (FITO) is designed to reduce double taxation when you have paid foreign tax on income that is also taxable in Australia. Where the conditions are met, foreign tax you have actually paid can be credited against your Australian tax on that income, subject to an offset limit. You need records showing the foreign tax paid, and both the amount and timing matter. The offset is not automatic and does not always equal the full foreign tax paid, so the calculation should be worked through carefully against your own figures and supporting documents.

Australia has tax treaties — double tax agreements — with many countries. These set out which country has taxing rights over particular types of income, such as employment income, pensions, dividends or royalties, and can affect how that income is treated here. They are intended to reduce instances of the same income being fully taxed twice. Whether and how a treaty applies depends on the specific country, the type of income and your residency. We flag where a treaty may be relevant, but the detail is technical and should be considered carefully against your actual circumstances.

The key question is whether you become a non-resident for tax, which depends on the facts of your departure, not simply leaving the country. Changing residency can also raise capital gains tax considerations on certain assets, and it interacts with your main residence, HELP or HECS repayments and the Medicare levy. It is worth reviewing your position before you go, so the year of departure is reported correctly and there are no surprises. We can talk through what records to keep while you are away. This is general information and your circumstances should be assessed individually.

When you become an Australian tax resident, you generally start being taxed on worldwide income from that point, and certain assets you hold may be treated as acquired at their market value when residency begins. The year you change status often needs careful handling, because part-year residency rules and the tax-free threshold can apply differently. We help you work out when residency commences, what foreign income and assets to bring into the picture, and how to prepare that first return accurately. Each situation differs, so we assess yours specifically before forming a view.

Foreign income and foreign tax paid must be reported in Australian dollars. There are accepted conversion methods — for example, using the exchange rate at the time a transaction occurred, or an average rate over a period where that is appropriate. The right approach depends on the type and frequency of the income. Using the correct rate and date matters, because errors flow through to both the income declared and any foreign income tax offset. We apply an appropriate method consistently and keep the workings on file alongside your return for later reference.

No. The information here is general only and does not take your personal circumstances into account. Foreign income and residency are among the more complex and fact-specific areas of Australian tax, and small differences in facts can change the outcome significantly. Nothing here should be relied on as personal tax advice. To get a view you can act on, we review your actual documents and circumstances and, where the position is genuinely uncertain, set out the basis for the approach taken. Eligibility and outcomes depend on the law for the relevant income year.