Target Foreign Income is any income earned, derived and received from sources outside Australia. It includes any payment and/or benefit by way of gifts or allowances made in a periodic manner from a source outside Australia provided that the amount has neither been included in your taxable income nor in the form of fringe benefit.
[ctt template=”7″ link=”Q5bAU” via=”no” ]Target Foreign Income is any income earned, derived and received from sources outside Australia.[/ctt]
The income can include interest in overseas bank accounts, foreign pensions, rent derived, investment properties, employee share schemes from overseas and all wages earned in other countries, regardless of the amount.
Types of target foreign income you need to show in your tax return include the following:
- Regular receipts of money and gifts from relatives living overseas which are exempt from Australian tax
- Income from foreign business interests and investments, which are exempt from Australian tax, including income received by migrants with business interests in their country of origin
- Foreign source income received while you were a temporary resident that is exempt from Australian tax
- The amount of exempt foreign employment income.
There are a number of steps that people can take to ensure they are in the best position to prove the source and determine the treatment of funds from an income tax perspective.
These steps include:
- If you transfer funds into Australia, know and keep evidence of the source of the funds.
- While travelling keep track of your mailbox/PO box. If you receive an information request from the ATO and do not respond there will be a greater cost to rectify the situation.
- Get your tax advisor or accountant to help so you understand your position before you respond to the ATO. In particular, make sure you understand your residency status from a tax
There needs to be a lot more education around the Australian tax system for migrants. This would help remedy some of the issues people are experiencing when it comes to the taxation of funds transfers.
Individuals need to be proactive in keeping up to date with the ATO’s stance on foreign income and ensure they are doing the right thing. Importantly, if they are unsure they should seek expert advice to avoid issues with taxation in the longer term.
You may also be interested in: Your Tax Return and What Is Fringe Benefits Tax?
If you have any further questions about target foreign income, one of our Shuriken specialists is ready to assist you. Get in touch with us: