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  • Assessment methods

    Select the non-resident foreign income assessment method.

    There are three assessment methods available to determine your client's non-resident foreign-sourced income:

    Note: The overseas assessed method should not be used if:

    • the period of assessment of a person's income by a foreign tax authority does not overlap the relevant Australian income year (1 July – 30 June)
    • multiple assessments of a person's income for periods of 12 months overlapping the relevant Australian income year were made by tax authorities of different foreign countries
    • the most recent assessment by a foreign tax authority has previously been used to calculate the non-resident foreign income.

    The method your client chooses to determine their non-resident foreign-sourced income this year does not restrict their choice of method in a subsequent year.

    See also:

    Simple self-assessment method

    You must provide the following information when using the 'simple self-assessment' method.

    Gross income

    Provide the gross amount of non-resident foreign-sourced income your client earned during the year.

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    Deduction median rate

    The standard deduction median rate for a selected occupation is based on the median ratio of work related expenses to employment-related income.

    See also:

    Standard occupation deduction

    The standard deduction is an amount determined by multiplying the standard deduction rate of an occupation by gross income.

    If you have selected 999000 ‘Occupation not listed’ in the foreign occupation field (for example, if your client is an investor, retired or a pensioner), no standard deduction can be calculated. The standard deduction amount applied will be zero.

    Depending on your client's personal circumstances, for example, if there are deductions that would be allowable under Australian tax laws, you may wish to use a different assessment method to determine the non-resident foreign-sourced income component of their worldwide income. For example, the comprehensive tax-based assessment method allows you to claim specific deductions relating to your client's income or financial circumstances.

    Comprehensive tax-based assessment method

    You must provide the following information when using the 'comprehensive tax based' method.

    Under the comprehensive tax-based assessment method, you assess your client's total foreign income using Australian taxation rules. Foreign-sourced income is the difference between total (pre-tax) foreign income and the deductions that would be allowable under the Australian taxation system.

    This method allows you to claim specific deductions as if your client were living and earning income in Australia.

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    What to report at gross foreign income labels

    Foreign-sourced income is income earned from outside Australia when your client was a non-resident for tax purposes, for example, when working overseas.

    You must report all the foreign-sourced income that your client earned during the relevant Australian income year as a non-resident for Australian tax purposes in this section. You must do this even if tax was taken out in the country where they earned the income. Remember to report all foreign source income earned while an Australian resident in the IITR. For more information, see Foreign source income and foreign assets or property.

    You must provide the gross amount (pre-tax amount) of your client's foreign income. The foreign income you need to report may consist of the following:

    Find out about:

    Total salary / wages

    Income from salary or wages includes:

    • salary and wages
    • commissions
    • bonuses
    • income from part-time or casual work
    • parental leave pay
    • amounts for lost salary or wages paid under        
      • an income protection policy
      • a sickness or accident insurance policy
      • a workers compensation scheme.
       
    Total allowances

    Payments of income from working (other than salary or wages) include:

    • employment allowances – for example, car, travel, meals, entertainment, tools, clothing, laundry and site allowances
    • tips and gratuities
    • consultation fees.
    Total government allowances

    Government allowances include allowances paid to your client by a foreign government that form part of their foreign-source income. For example:

    • unemployment benefits
    • sickness allowances
    • education payments
    • parenting payments
    • other government provided income support.
    Total pension income

    Pensions include foreign government pension payments and superannuation income. Some types of government pensions are:

    • age pension
    • carer payment
    • disability pension
    • military pension.
    Total interest

    Foreign income may include any interest paid or credited to your client from any source outside Australia, including:

    • interest from savings accounts, term deposits and cash management accounts
    • interest from children’s savings accounts opened or operated with funds that were your client's or your client used as if they were theirs.
    Total dividends

    Foreign income may include dividends and distributions that were paid or credited to your client by foreign companies while they were a non-resident such as:

    • dividends applied under a dividend reinvestment plan
    • dividends that were dealt with on behalf of your client
    • bonus shares that qualify as dividends
    • distributions by a corporate limited partnership
    • dividends paid by a corporate unit trust
    • dividends paid by a public trading trust
    • dividends paid by a listed investment company.

    Note: If dividends were received from an Australian company while your client was a non-resident, this should be included in the Australian income tax return.

    Total other income

    Other income that may form part of foreign income includes income your client earned as a non-resident such as:

    • royalties
    • bonus amounts distributed from friendly society income bonds
    • scholarships, bursaries, grants or other educational awards
    • income from activities as a ‘special professional’ that is not included elsewhere on this form (author of a literary, dramatic, musical or artistic work, inventor, performing artist, or active sportsperson)
    • any balancing adjustment when your client stopped holding a depreciating asset (for example, because of its disposal, loss or destruction) for which you have claimed a deduction for depreciation or decline in value in previous years; a car, for example, is a depreciating asset
    • payments made under an income protection, sickness or accident insurance policy where your client was self-employed and the payments replaced income, that have not already been included elsewhere.
    Last modified: 01 Jul 2019QC 52826