Overseas Retirement Plan

[#1]

I am an Australian citizen and resident for tax purposes and am also a British passport holder. I started a savings plan with a company on the Isle of Man in the year 2000. It is about to mature and has made a capital gains of around $32000. The tax rate for a reported fund in the UK is 20% whereas the tax rate in Australia would be 37% because of my other income. Can I pay tax to the UK and then claim this as a tax deduction on my Australian tax return when I transfer the money to Australia? Also would the ATO tax me further even if I had paid tax to the UK?

Thanks

Rosie

[#2 · Accepted solution]

Hi @rosiebetsie

If you're an Australian resident for tax purposes, you're required to report your worldwide income in your Australian income tax return. If you've received foreign income and paid tax in the source country, you can claim a tax offset for the foreign tax you've paid on income, profits or gains (including gains of a capital nature) that are included in your Australian assessable income.

To be entitled to a foreign income tax offset:

• you must have actually paid, or be deemed to have paid, an amount of foreign income tax
• the income or gain on which you paid foreign income tax must be included in your assessable income (or your non-assessable non-exempt (NANE) income under section 23AI or 23AK of the ITAA 1936) for Australian income tax purposes.

After claiming the foreign income tax offset you would only be taxed the difference between the Australian and UK tax rates by the ATO.

See more information about Calculating and claiming your foreign income tax offset on our website.

Hope this helps.

Thanks, Nate