Confession is good for the soul (and can keep you out of trouble)

The ATO has come out this week to remind us that they’re watching you and so are their international counterparts.

https://www.ato.gov.au/Media-centre/Media-releases/ATO-watching-for-foreign-income-this-Tax-Time/

Through the Automatic Exchange Of Information developed by the OECD in 2014, the ATO and international tax authorities share bank account information with each other, including yours.

This year, “The ATO has shared data on financial account information of foreign tax residents with over 65 foreign tax jurisdictions across the globe. This includes information on account holders, balances, interest and dividend payments, proceeds from the sale of assets, and other income.”[1]

It’s a common misconception among Australian taxpayers that if you have foreign investments or other income, and you’re paying tax in that country, you don’t need to include this information in your Australian tax returns.

Whilst at WLF we make every effort to ask you the right questions, we don’t know what you don’t tell us. So, it’s important that you let us know about any investments you might have overseas, even if you think it might not be relevant.

You should let us know about your:

• Salary from working offshore or for a foreign entity
• Foreign shares or real estate – even if these aren’t earning you money we should have a discussion about the potential issues you might face if and when you decide to dispose of these assets
• Foreign bank accounts – whether or not you’re receiving interest
• Foreign superannuation funds
• US social security payments (or similar) – might not be taxed in Australia, but these can affect your entitlement to certain offsets.

Australian tax residents are taxed on their worldwide income, but you will likely get a credit for any tax that you’ve paid overseas.

Now residency can get tricky, you may be on a working holiday and being taxed in that country and think that because you’re living overseas you don’t need to report this income. However, residency for tax purposes depends on a multitude of factors and isn’t always straight forward.

It can be difficult to know exactly what you should disclosing and it’s always best to tell the ATO about any errors before they contact you. The best thing to do if you think you’ve made an omission or mistake is to contact us and we can advise on your next steps.

[1] ATO Media release 15 Aug 2019