Hello,
My child is currently working overseas and will need to declare his foreign income on his Australian tax return. For the foreign tax offset - is tax considered to be paid each pay period when it is deducted from his pay by his employer or when he lodges his tax return?
Hi @Olivia_K82,
Foreign tax is considered paid when it has actually been withheld and remitted to the foreign tax authority. For your child's situation, the tax withheld from their pay by their overseas employer each pay period is generally considered paid at that time, as the employer has deducted and remitted it to the foreign government.
Your child can claim a foreign income tax offset for the amounts of foreign tax that have actually been paid during the income year. The key requirement is that the tax must have been paid and won't be refunded. If your child expects to receive a refund of any foreign tax when they lodge their overseas tax return, that portion cannot be claimed as an offset.
It's important to note that if your child claims an offset for foreign tax and later receives a refund of that tax, they'll need to declare the refund as income in the year they receive it. Your child must convert all foreign income and foreign tax paid to Australian dollars before completing their Australian tax return.
To claim the foreign income tax offset correctly, your child should review the guidance on foreign employment income and use the foreign income conversion calculator when preparing their Australian tax return. The foreign income must be included at the gross amount before foreign tax was withheld.
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