Settlement Guide

Settlement Guide: Australians investing overseas

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Ever dreamt of buying property overseas? While it can provide a good return on investment, all foreign earnings must be declared as extra income to the Australian Taxation Office.

A surprising number of Australians are receiving income from overseas. An Australian Taxation Office (ATO) analysis of 13 million tax returns from 2014 reveals around five per cent of Australian tax payers are earning money from investments in other countries. The real figure, however, could be much higher, says Christian Schoener, Director of Sydney accountancy firm CGSA, which specialises in international tax. He says owning property or investment overseas is a trend that has grown steadily over the past two decades.

Around five per cent of Australian tax payers are earning money from investments in other countries


"In the last ten to twenty years what we have seen is people become more mobile and starting to discover something outside of Australia. With that, once you go somewhere, I think it's kind of a natural progression that you think of how do I secure my life later on? So, it wouldn't be a surprise if people who depart from Australia maybe going somewhere and invest in a property."

The ATO now requires all residents to declare all overseas income, including, pensions and annuities, employment, investment and business income, and capital gains on overseas assets


As Australians have become more globally oriented, the ATO now requires all residents to declare all overseas income, including, pensions and annuities, employment, investment and business income, and capital gains on overseas assets. Christian Schoener says the ATO has significantly widened its focus of tax collection as more data has become available globally.

Declaring an overseas income to Australia does not necessarily mean that tax has to be paid locally


"Australia has a concept of world-wide incomes, so our Tax Office here in Australia would like to see any kind of earnings that you had in the world to be declared here in Australia. So, it doesn't matter if it's rent, dividend income or any other kind of investment income that you have overseas."

Australia has taxation-agreements with 40 countries to prevent double taxation


Declaring an overseas income to Australia does not necessarily mean that tax has to be paid locally. Australia has taxation-agreements with 40 countries to prevent double taxation. Christian Schoener explains that the ATO takes into account how much income tax has already been paid overseas and then compares that amount to what would be due under our own tax system.

Australian residents are also obliged to declare ownership of any overseas property, shares or other assets valued at more than 50-thousand dollars, even if no income has been earned


"To the extent that you have paid all your taxes, there's a calculation that goes on behind the scenes and they might view that you have either have not paid enough, then the Australian Tax Office would ask you to pay the shortfall."

Australian residents are also obliged to declare ownership of any overseas property, shares or other assets valued at more than 50-thousand dollars, even if no income has been earned. Christian Schoener says declaration of foreign assets is one of the questions in your tax return.

Foreign investment taxation rules also apply to beneficiaries of overseas inheritances


"You have to tick the box in your income tax return that you own investments overseas. So, you need to look at what kind of bank account you may have, shares that you may own overseas or any kind of property that you may own and if that has a value higher than 50 thousand Australian dollar - you need to tick the box."

Foreign investment taxation rules also apply to beneficiaries of overseas inheritances. If the value is over 50-thousand dollars and the new owner is an Australian resident, the inheritance and any possible income from it have to be declared in Australia.

While tax evasion is a crime in Australia, some overseas investors still attempt to hide their wealth from the ATO


"This is another way of how you may become the owner of an overseas investment without actually paying for it. What we discussed earlier, you need to tick the box as you now have an investment you need to declare this as an income. There is no way around it."

While tax evasion is a crime in Australia, Christian Schoener says, some overseas investors still attempt to hide their wealth from the ATO. He warns, that with growing international cooperation, tax evaders are more likely to be detected and punished.

Income and assets from outside Australia can also impact upon the rate of an Australian age pension


"The agencies nowadays are working really closely together and that is probably the one thing people should take into consideration when filing out their tax return. Even though that it might be only in 10 years' time, but tax evasion is not something that you easily can escape. So you'll always be liable If tax evasion occurs."

Income and assets from outside Australia can also impact upon the rate of an Australian age pension. Christian Schoener says Centrelink may review pension payments if overseas income pushes total income above the allowed limits.

There is information sharing between Centrelink and the ATO


"The pension is a payment from the government to help people who don't have an income to sustain their lifestyle. So, essentially you would assume that the pension will be impacted by any kind and form of additional income and you will need to disclose that you have additional income. And, there is information sharing between Centrelink and the ATO as well, so Centrelink will be informed at some point in time."

Centrelink must be informed if you are going to live in another country for more than six weeks


Spending overseas income in the country it's earned may also effect an Australian pension. Centrelink must be informed if you are going to live in another country for more than six weeks. Christian Schoener says the ATO also wants to know how long you intend to be away from Australia.

The ATO also wants to know how long you intend to be away from Australia


"If someone goes back to their home country or someone wants to relocate to another country, when do they stop to being a resident in Australia? There are certain rules: one easy determination is the 183 days rule but this is not the only one. So you need to look a little bit closer as to what is your real place of residence? Are you intending to come back to Australia? I recommend to call the ATO and discuss your matter with them."

For more information on declaring foreign income visit the ATO's website.  
Understanding taxation rules is not easy but this Austrade's website provides helpful explanations.
Taxpayers Australia can explain the differences between tax avoidance and tax evasion.
The Department of Human Services provides information on income-tests applied to pensions and the allowed length of overseas stays.