If you are a foreign resident working in Australia, you 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. However, if you have a Higher Education Loan Program (HELP), Trade Support Loan (TSL) or VET Student Loan (VSL) debt you may need to declare your worldwide income.
You also don’t declare any Australian-sourced interest, dividends or royalties you derive while you are a foreign resident, provided the Australian financial institution or company that pays you has already withheld tax. They do this automatically if you advise them that you are a foreign resident.
You can't claim the tax-free threshold, so you pay tax on every dollar of income you earn in Australia.
You don’t pay the Medicare levy in your Australian tax return, as you aren't entitled to Medicare health benefits. You can claim an exemption from paying the Medicare levy for the number of days in the income year you are a foreign resident.
Foreign resident withholding tax
Payments for the following are subject to foreign resident withholding tax:
- promoting or organising casino gaming junket arrangements
- entertainment and sports activities
- contracts for the construction, installation and upgrading of buildings, plant and fixtures and for associated activities.
Your payer will withhold this tax. You report the payments in your Australian tax return and claim the withheld amounts as a credit against the tax assessed.
Foreign resident deferred withholding tax liabilities
If you had Australian-sourced interest or dividend income while you were a non-resident and the payer did not withhold tax, you need to disclose this in your income tax return for the relevant income year.
You may be given an extension until the payment is due or when it would be due. We have deferred the time at which certain withholding tax liabilities are due and payable by a non-resident taxpayer who satisfies all of these conditions:
- The interest income or dividend income is derived by the taxpayer during the income year of tax when the taxpayer was a non-resident.
- The taxpayer has disclosed the interest or dividend income in an income tax return they have lodged for the relevant income year.
- The taxpayer has a withholding tax liability for that interest or dividend income.
- The payer of the interest or dividend has not withheld the amount of the withholding tax liability from the payment.
For a taxpayer who satisfies all of the above conditions, the due date for payment of the withholding tax on the interest or dividend income is deferred to either:
- the due date for payment of the taxpayer's income tax liability in respect of their income year for the relevant income year
- if the taxpayer doesn't have an income tax liability in respect of their income year for the relevant income year, the date on which income tax would have been payable if the taxpayer had an income tax liability in respect of their income year for the relevant income year.
Temporary residents for income tax purposes generally don't pay tax on income they earn in another country (unless they have acquired shares or rights under an employee share scheme).
Temporary resident foreign income exemption
You don't have to pay tax on most of your foreign income if you both:
- are an individual who is an Australian resident for tax purposes
- satisfy the requirements of being a temporary resident.
In this case:
- Most of your foreign income is not taxed in Australia. However, you are taxed in Australia on some income you earn from employment or services you perform overseas while you are a temporary resident.
- Employment or services income may be subject to income tax and you still declare it in your tax return in the income year you earn it.
- If you paid tax in a foreign country, you may be entitled to claim a foreign income tax offset when you lodge and declare that income in your Australian tax return.
You must convert all foreign income, deductions and tax offsets to Australian dollars in your tax return.Income you need to declare and pay tax on if you are in Australia as a foreign or temporary resident.