What portion of overseas income is taxable? by Rafael Amoranto

Allow me to clarify our clients’ queries when a tax payer changes his or her residency status.

Where a person resides in Australia and earns less than 50 per cent of his total income during the 12-month period, that person would be treated as a resident of Australia only during the actual time [that] he or she is present in Australia. What this means is that the person would not be assessed on foreign income derived during the period when not actually present in Australia.

For example, if a taxpayer resides in Australia for less than 6 months and decide to go overseas to get a new job then earns overseas income, that taxpayer does not have to report the overseas income when he or she lodges an Australian tax return.

What the taxpayer has to report in the Australian tax return is the income the taxpayer has earned when he or she actually resided in Australia. And for that Australian income, the resident tax rates apply rather than the foreign resident tax rates because the taxpayer is entitled to only part of the tax-free threshold relative to the months being a resident.

Besides the tax rates, there are other things foreign residents should consider when preparing an Australian tax return such as medicare levy, surcharge and tax offsets. Please call Financial Genius on (02)9858 2446 if further clarification is required.

Updated: 11/06/2012 — 19:01:44