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ATO Crackdown! | Are You Declaring Foreign Income in Your Tax Return?

Declaring foreign income
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Have you been earning money overseas or have an overseas bank account that you deposit money into?

Do you have assets or investments overseas?

Have you been a bit naughty by “accidentally” omitting this income from your tax return?

If so, this article applies to you.

 

What is Foreign Income?

In simple terms, foreign income relates to any income received:

  • Whilst working overseas (business, employment and personal services)
  • From overseas assets and investments
  • From capital gains on overseas assets when sold
  • and pensions and annuities

 

Recently it was announced that the ATO now has access to data from more than 1.6 million offshore financial accounts holding over $100 billion dollars!

They now have the power to track Aussie taxpayers whose income does not match up in their tax return through data-matching and sophisticated analytics that reveals foreign income that has not been reported.

As stated by ATO assistant commissioner, Karen Foat:

“If you’re an Australian resident for tax purposes, you are taxed on your worldwide income, so you must declare all of your foreign income no matter how small the amount may be. This may include income from offshore investments, employment, pensions, business and consulting, or capital gains on overseas assets.”

“Whether it is rental income from your old family home, an untouched bank account earning interest, or salary from working offshore, it must be reported. Even if you have paid tax on the overseas income, it must be reported to the ATO; however, you may be able to claim a foreign income tax offset to account for any foreign tax paid.”

Unsure whether this applies to you? Feel free to give us a call on (03) 9762 7344.

 

What foreign income data do they have access to?

The ATO has access to data on:

  • Depository accounts
  • Custodial Accounts
  • Debt or Equity accounts
  • Cash Value Insurance
  • Annuity contract accounts

And with this, they’ll be able to see:

  • Account balances
  • Interest payments
  • Dividend payments
  • Proceeds from the sale of assets
  • and other income.

The reason that the ATO are cracking down on foreign income is because they want to weed out those who are deliberately cheating the system. Those who are moving cash overseas in an attempt to hide it from the ATO and hence, pay less tax on their income.

Last year, 106 Aussies were singled out by the ATO due to being suspected of tax evasion by using unnamed Swiss bank accounts.

The ATO have also discovered a large number of Aussies who have had financial dealings in countries like China, the United Kingdom, Switzerland, Singapore and the United States, but have not reported it.

If you are unsure of whether you’ve been reporting your foreign income correctly in your tax returns, please get in contact with us so we can help you.

 

It’s better to be safe, than sorry!

As the ATO have stated, it’s best to fess up and come clean.

Don’t leave foreign income undeclared in hope that they won’t find it. The odds are they will and you’ll be liable for hefty penalties and interest charges.

If you’d like to learn more or find out whether this applies to you, please give us a call on (03) 9762 7344.

You can also contact us to book an appointment here. 

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