Tax on overseas earnings

[SmaSheD_CoW]

I spent a few months working in the US. Although I was on the books, the company's accountant was fairly useless, and didn't bother taking any tax out of my wage (not that I was complaining at the time). Since I'd like to be able to return to the US without being hauled to Guantanamo, I'm intending to file a US tax return at the end of their financial year (31 December) and pay whatever tax I owe.

Am I supposed to declare these US earnings on my Australian tax return? Some people have told me I don't need to, while others have said I have to but will get credit for any tax I've already paid in the US. Which is correct?

I'm going to have to wait until January to the official paperwork about my earnings from my US employer, so I figure I'll wait until then, pay whatever US tax I owe, and then lodge my 05/06 Australian tax return in early '07. Does this sound right?

[sullomate]

Sounds like a plan. I'm no pro, but I work between Oz and the Europe throughout the year, so I'm in that situation. The Aus government makes me state my overseas earnings in my yearly tax returns. They don't tax any of those earnings, but they do take them into account as if that money was earned in Oz, therefore raising tax brackets etc. I work with a couple other guys in the same situation and they don't state their foreign earnings...I guess it's up to you, ask your Accountant...that's what you pay them for.

[Movius]

Most of my income for the last 2 years was from Japan. I received a tax-credit on my tax return for taxes payed in Japan.

[Hairyman]

The same will occur for the tax you pay in the US, or any other country with which Australia has a reciprocal taxation agreement.

[Sagacious]

What Hairyman said

if you are resident in Australia for taxation purposes i.e. spend 183 or more days in the relevant taxation year in Australia you must declare all income from all sources in your return for the relevant financial year.

if you spend 182 or fewer days in Australia during the relevant taxation year (1 July-30 June) you need only declare income from Australian Sources in your Income Tax Return for that financial year.

If you have paid income tax on ex-territorial income then you have the opportunity to claim credits for the tax paid on the foreign sourced income as long as there is a treaty in place with respect to relief from double taxation.

Also see your own accountant.

That is all...

[ShinymetalASS]

well that saved me some typing.

hello sagacious. haven't seen you in a while. :)

p.s. I know you do law at uni, SC, you really should make a point of studying taxation while you are there. puts the whole shooting match into perspective. plus it gives you a chance to watch all the pretentious business students flounder.

[SmaSheD_CoW]

well that saved me some typing.

hello sagacious. haven't seen you in a while. :)

p.s. I know you do law at uni, SC, you really should make a point of studying taxation while you are there. puts the whole shooting match into perspective. plus it gives you a chance to watch all the pretentious business students flounder.

Yeah I'm doing it next semester I think :shrug:

[Arsozah]

well that saved me some typing.

hello sagacious. haven't seen you in a while. :)

p.s. I know you do law at uni, SC, you really should make a point of studying taxation while you are there. puts the whole shooting match into perspective. plus it gives you a chance to watch all the pretentious business students flounder.

Since I have little chance to show that I actually do have a law degree: Sagacious couldn't have been more right... listen to him and fear him when he finishes his uni :)

Plus, Shiny is also right - taxation law was the most intricately fascinating area of law I ever had the pleasure of studying, if you can fit it in (make it fit in!) take all the courses you can. It's an absolute pleasure.

One day I will fulfil my dreams of becoming a tax lawyer. :cry:

[Sagacious]

Since I have little chance to show that I actually do have a law degree: Sagacious couldn't have been more right... listen to him and fear him when he finishes his uni :)

Plus, Shiny is also right - taxation law was the most intricately fascinating area of law I ever had the pleasure of studying, if you can fit it in (make it fit in!) take all the courses you can. It's an absolute pleasure.

One day I will fulfil my dreams of becoming a tax lawyer. :cry:
hehehe this is funny I haven't been in uni for like 13 years! Thanks for making me feel younger Arsozah.

[stevecai]

I think this has been adequately covered already.

The US applies. You can find it at http://www.irs.gov/pub/irs-trty/aus.pdf

You are an Australian resident if you haven't been there for long so you'll have to pay tax in Australia. Check out Article 4. See if it sounds like your circumstances.

After that see Articles 14,15 and 27(2). See if they sound like your situation.

Sorry its so vague, I just don't know your circumstances well enough to judge.

I personally think Article 14 will apply to you. If you aren't in the US long enough (183 days).

When you read Articles 14 and 15, to make it easier just substitute any reference to "contracting state" with "Australia" and "that other contracting state" with "the US".

Hope this helps.