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Re: Foreign Income

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AV
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Hi All,

 

Thanks in advance for any guidance and insight given.

 

I moved to Australia in March 2016, making me a Resident for tax purposes.

 

I have been working on a project for an overseas company since last Nov. To begin with I created an ABN to make sure I work legally for this (already have a TFN).

 

My work is basically as a consultant for a software development which will be used overseas only. So, I am pretty sure, as the services provided was not in Australia there wont be any GST applicable.

 

As this is a foreign income for service rendered overseas, will the invoiced amount received in Australia be a tax exempt income??

 

If it isnt exempt, will i be able to claim the work home deductions as per the normal criterias?

 

Thanks again.

 

AV

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Hi @AV,

 

Welcome to our Community!

 

If you are making the supply of consultancy services through an enterprise that you carry on in Australia, your supply will be connected with Australia. However as you are making your supply to an overseas company who is not in Australia when the supply is done, the supply will be GST-free under item 2 or 3 of subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

 

If you have further queries regarding your circumstances you can phone us on 13 28 61 between 8am - 6pm, Monday to Friday to speak with an operator.

 

Thanks.

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From Foreign Income:

"If you're an Australian resident for tax purposes, you are taxed on your worldwide income, so you must declare any foreign income in your income tax return." 

assuming you are an australian resident for tax purposes (you can check here), it seems like this income probably will be taxed. 

 

In terms of GST (From GST Free sales) : 

"Other exports

Other exports generally include supplies of things other than goods for consumption outside Australia, such as services, various rights, and other professional services.

Broadly, a supply of a service is GST-free if the recipient of the service is outside Australia.

There are specific rules that determine whether such a supply is GST-free."

 

The Legislation gives more specific conditions: "...

Supplies of things, other than goods or real property, for consumption outside the indirect tax zone [...]

These supplies are GST-free (except to the extent that they are supplies of goods or * real property)... [...]

 

Supply to * non-resident outside the indirect tax zone.

a supply that is made to a * non-resident who is not in the indirect tax zone when the thing supplied is done, and:

    (a) the supply is neither a supply of work physically performed on goods situated in the indirect tax zone when the work is done nor a supply directly      connected with * real property situated in the indirect tax zone; or

    (b) the * non-resident acquires the thing in * carrying on the non-resident's * enterprise, but is not * registered or * required to be registered. ..." (emphasis mine, "indirect tax zone means Australia (within the meaning of the *ITAA 1997" - 195-1 of the same act, and registered in the above table refers to GST registered (as in part 2-5 of the same act.))

 

It seems that as a consultant for an overseas (presumably non resident, non-gst registered) company, the services you supply to them are likely to be GST-Free as they don't operate in australia. 

 

In terms of claiming deductions, the following might be useful: 

There's nothing in these pages that would suggest to me that you couldn't claim deductions from your taxable income as per normal buisness deductions rules. 

 

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Hi @AV,

 

Welcome to our Community!

 

If you are making the supply of consultancy services through an enterprise that you carry on in Australia, your supply will be connected with Australia. However as you are making your supply to an overseas company who is not in Australia when the supply is done, the supply will be GST-free under item 2 or 3 of subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

 

If you have further queries regarding your circumstances you can phone us on 13 28 61 between 8am - 6pm, Monday to Friday to speak with an operator.

 

Thanks.

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