Albert is an Australian resident and is not married. He previously lived in the United Kingdom and now receives dividend, interest and rental income from the United Kingdom. Albert worked for and was paid by an American company in the United States for 80 days during the year. He also worked for an Australian employer in the United Kingdom for a short period and worked in Australia for the remainder of the year.
All foreign income, deductions and foreign tax paid must be expressed in Australian dollars. The following table shows you how to do this. Phone us on 13 28 61 to find out the exchange rates.
Type of foreign income |
Convert foreign income to Australian dollars at: |
|---|---|
Foreign employment income, pensions and annuities |
the exchange rate that applied at the time you were paid or had the income applied or dealt with on your behalf or as you directed (such as into a bank account), even if no amount was remitted to Australia |
Foreign business income and other income such as dividends and interest |
the exchange rate that applied at the earlier of when you received or derived the income (or, for statutory income, the earlier of when you received the income or were first required to include it in your assessable income) |
Foreign capital gains |
the exchange rate that applied at the time of the transaction or event for each transaction or event involving an amount of foreign currency (or the market value of property expressed in a foreign currency). For example, if an amount included in the cost base of an asset is expressed in foreign currency, convert that amount into Australian currency on the date that the expenditure was incurred. Convert capital proceeds on the date of the CGT event. |
Foreign tax paid |
the exchange rate that applied at the time the foreign tax was paid |
Foreign deductions (other than capital allowances) |
the exchange rate applicable at the earlier of when the amount was paid or when it became deductible |
Depreciating assets |
the first element of cost of a depreciating asset is to be converted at the exchange rate that applied at the earlier of when you begin to hold the asset or satisfied your obligations for it (that is, when you paid for it) - this converted cost is then used to calculate the capital allowance deductible. From 1 July 2003, if the foreign currency became due for payment within the 24-month period that began 12 months before you began to hold the depreciating asset, any realised foreign currency gain or loss (referred to as a forex realisation gain or a forex realisation loss) can modify the asset's cost, opening adjustable value, or the opening balance of your low-value pool. Otherwise, that gain or loss is included in assessable income or allowed as a deduction Similar consequences apply for the second element of cost amounts involving foreign currency. However, the conversion to Australian currency is made at the exchange rate applicable at the time you incurred the relevant expenditure and a 12-month rule instead of a 24-month rule applies. The 12-month rule requires that the foreign currency became due for payment within 12 months after the time you incurred the relevant expenditure. |
Important
At the time of publication, the tax law did not allow the use of average rates. However, the Minister for Revenue and Assistant Treasurer issued Press Release 002 on 5 August 2004 indicating regulations would be made that would allow average rates of exchange to be used in some circumstances. The Commissioner has stated he will allow taxpayers to anticipate the changes announced in the press release, subject to certain conditions. For more information on the announcement and the conversion of foreign amounts to Australian dollars, see the Tax Office fact sheet Translation (conversion) rules, available on our website.
Below are details of Albert's income, expenses and the foreign tax he paid. All Albert's foreign income amounts have been converted to Australian dollars.
Gross income
Employment income from Australia |
$22,000 |
Employment income from United States |
$6,000 |
Employment income from United Kingdom |
$4,000 |
Rental income from property in United Kingdom |
$1,000 |
Dividend income from United Kingdom (see note) |
$600 |
Interest income from United Kingdom |
$400 |
Total gross income |
$34,000 |
Expenses
Medical expenses |
$2,500 |
Expenses incurred in deriving employment income from Australia |
$2,000 |
Expenses incurred in deriving employment income from United States |
$450 |
Expenses incurred in deriving rental income from United Kingdom |
$250 |
Gift to a deductible gift recipient |
$200 |
Interest (debt deductions) incurred in deriving dividend income |
$70 |
Expenses (debt deductions) incurred in deriving interest income |
$30 |
Total expenses |
$5,500 |
Foreign tax paid
Employment income from United States |
$1,800 |
Dividend income from United Kingdom |
$60 |
Interest income from United Kingdom |
$40 |
Rental income from United Kingdom |
$300 |
Total foreign tax paid |
$2,200 |
Note: Albert holds less than 10% of the voting power in the United Kingdom company.