Have you correctly reported your foreign income to the Australian Taxation Office (ATO)?
If you have not correctly reported your foreign income to the Australian Taxation Office (ATO), you should contact King Lawyers immediately to get legal advice on the best way to deal with this matter as soon as possible.
Why do you need to report your foreign income to the ATO?
If you are an Australian resident for tax purposes, you are taxed on your worldwide income. This means that you have to pay tax to the ATO on your Australian income and your overseas income. Therefore, as a tax resident of Australia, you must declare all of your foreign income to the ATO in your Australian income tax return.
Are you a resident of Australia for tax purposes?
To understand your tax obligations to the ATO regarding your foreign income, you first need to work out if you are an Australian resident for tax purposes.
Tax residency is a complex issue that often requires expert legal advice from an experienced tax lawyer.
What type of foreign income do you need to report to the ATO?
Your foreign income may include:
- pensions and annuities
- business income
- employment and personal services income
- assets and investment income (including offshore bank accounts)
- capital gains on overseas assets
If you have worked overseas or provided services to an organisation located outside of Australia, you will need to declare all relevant income as if the income was earned in Australia. This may include:
- salary and wages
- directors fees
- consultancy fees
- business income
If you own assets or investments overseas you will need to declare all relevant returns as if they were in Australia. This may include:
- interest from bank deposits or bonds
- dividends from shares
- royalties from intellectual property
- rental income from real estate
- pensions, annuities and lump sums from managed funds
- income streams from super funds
- some government pensions
Do you need to make a voluntary disclosure to the ATO for unreported foreign income?
If you have made a mistake and not reported your foreign income to the ATO in your tax returns, you can make a voluntary disclosure to the ATO to disclose your foreign income. A voluntary disclosure gives you the opportunity to fix your mistake and bring your tax affairs into order.
If your voluntary disclosure to the ATO is done correctly and accepted by the ATO in full, it is likely that the penalties by the ATO will be significantly reduced. In some cases, the discount on the penalties can be up to 80% of the tax shortfall. Generally, to maximise the penalty discount, the voluntary disclosure should be done as soon as possible and before an ATO audit.
To get the best result for your voluntary disclosure to the ATO, it is recommended that you engage an experienced tax lawyer to make the voluntary disclosure to the ATO on your behalf.
What happens if you do not correctly report your foreign income to the ATO?
In Australia, there are heavy penalties for failing to report your foreign income to the ATO. In some case, the financial penalty can be as high as 90% of the tax shortfall.
For example, if the tax that you have failed to pay to the ATO on your foreign income is $100,000 for a particular financial year, the financial penalty for your failure to do so can be as high as $90,000 in addition to $100,000.
Can the ATO criminally prosecute you if you fail to correctly report your foreign income to the ATO?
In Australia, the ATO can criminally prosecute taxpayers who intentionally and deliberately fail to report their foreign income to the ATO. Tax fraud is a very serious crime in Australia and it is punishable by a maximum penalty of 10 years imprisonment.
To minimise the chances of criminal prosecution by the ATO, it is important that you seek expert legal advice on your legal obligation to report your foreign income to the ATO. If you have made a mistake in your tax return, you should take urgent action to fix the mistake as soon as possible.
Do you need legal advice from an experienced tax lawyer to make a voluntary disclosure to the ATO and correctly report your foreign income to the ATO?
This content of this article is offered as general information only and should not be relied on as specific legal advice for your tax debt with the ATO.
To get legal advice from King Lawyers on your specific circumstances, please contact us to arrange an initial consultation with our expert tax lawyers.