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Foreign Income Offset Limit

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Newbie

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Hey Macfanboy or other members, I'm reposting this as I never got an answer on how to work this out:
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I'm an Australian resident living and working in Canada. I'm on a 2 year working Visa since 2018 where I earned income from December 2018 - April 2019.

 

I was a resident for tax purposes in Australia for the July 2018 - June 2019 tax year.

I completed a tax return in Canada for the one month I worked during their tax year Jan 2019 - Dec 2018 (So just December 2018).

I have also paid tax in the current 2019 Canadian tax year which has yet to finish so I have not yet completed a 2019 Canadian tax return.

 

I assumed I would still need to include the 2019 tax paid from Canada although not yet returned. 

So based on that I calculated a foreign tax income of over $1000 thereby being required to calculate a foreign income offset limit.

 

Here's where I get confused.

I've followed the 'Calculating your offset limit' steps on your website, I've calculated my Taxable Income: $49,894 and my Foreign Income Tax Paid: $1,063.77 but the examples on your website don't show certain workings and where certain numbers come from or how to do it for my tax bracket ($37,001 – $90,000).

 

My questions:

Firstly, do I definitely need to include my unclaimed 2019 Canadian Tax in my Australian Tax Return? If not I would be under the $1000 foreign tax.

If I do, can you send me a more specific example for my tax bracket (using my numbers if possible) and how I would calculate my offset limit?
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My Tax details are as follows:

AUS INCOME: $38,799.00

AUS TAX: 10,620.00

CDN INCOME: $9,110.32aud

CDN TAX: $1,063.77aud

Do my deductions and interest earned factor into this too?

AUS INTEREST: $2094.58

AUD DEDUCTIONS: $109.87
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Thanks for your help!

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Taxicorn

Replies 2

Ok Australian Taxable income = $40,783.71 ($38,799 + $2,094.58 - $109.87)

 

Overseas Income = $9,110.32

Overseas Tax = $1,063.77

 

So total taxable income = $49,894.03

 

Tax on Total Income of ($49,894.03)  = $8,760.44 (Tax = $7,762.56 & ML = $997.88).

 

Now just tax on Australian Income ($40,783.71) = $5,617.08  (Tax = $4,801.41  & ML = $815.67)

 

Additional Tax & ML on Foreign Income = $3,143.36  ($8,760.44 - 5,617.08)

 

Maximum Foreign Income Tax Offset limit = $3,143.36

 

Amount of FITO claimable (lesser of Maximum & Foreign income tax paid) = $1,063.77

 

A couple of questions for you:

 

(1) What Conversion factor did you use to convert Canadian to Australian? - You can use either when paid or end of the financial year.

 

https://www.ato.gov.au/Rates/Foreign-exchange-rates/

 

(2) Did the Canadian Income include deductions?

 

(3) Are you still required to do a Canadian Tax return if you are still considered to be an Australian Resident for tax purposes?

 

(4) Will you still be considered to be an Australian Resident for tax purposes for 2020? - I think so

 

If you are considered to be an Australian Resident for tax purposes then you need to declare all of your worldwide income for tax purposes.

 

I think that the Emily example would be you:

https://www.ato.gov.au/uploadedFiles/Content/MEI/downloads/n75127-DE-5543_Residency-for-tax-purposes...

 

By the way, I was waiting for figures to help you that's why I didn't respond yet...

 

 

 

 

 

3 REPLIES 3
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Most helpful response

Taxicorn

Replies 2

Ok Australian Taxable income = $40,783.71 ($38,799 + $2,094.58 - $109.87)

 

Overseas Income = $9,110.32

Overseas Tax = $1,063.77

 

So total taxable income = $49,894.03

 

Tax on Total Income of ($49,894.03)  = $8,760.44 (Tax = $7,762.56 & ML = $997.88).

 

Now just tax on Australian Income ($40,783.71) = $5,617.08  (Tax = $4,801.41  & ML = $815.67)

 

Additional Tax & ML on Foreign Income = $3,143.36  ($8,760.44 - 5,617.08)

 

Maximum Foreign Income Tax Offset limit = $3,143.36

 

Amount of FITO claimable (lesser of Maximum & Foreign income tax paid) = $1,063.77

 

A couple of questions for you:

 

(1) What Conversion factor did you use to convert Canadian to Australian? - You can use either when paid or end of the financial year.

 

https://www.ato.gov.au/Rates/Foreign-exchange-rates/

 

(2) Did the Canadian Income include deductions?

 

(3) Are you still required to do a Canadian Tax return if you are still considered to be an Australian Resident for tax purposes?

 

(4) Will you still be considered to be an Australian Resident for tax purposes for 2020? - I think so

 

If you are considered to be an Australian Resident for tax purposes then you need to declare all of your worldwide income for tax purposes.

 

I think that the Emily example would be you:

https://www.ato.gov.au/uploadedFiles/Content/MEI/downloads/n75127-DE-5543_Residency-for-tax-purposes...

 

By the way, I was waiting for figures to help you that's why I didn't respond yet...

 

 

 

 

 

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Newbie

Replies 1

@macfanboy thanks so much for that. I still just had a couple of Q's based on your answer.

I'm still a bit confused how you got these numbers:
$8,760.44 (Tax = $7,762.56 & ML = $997.88) and $5,617.08  (Tax = $4,801.41  & ML = $815.67) 
I was after the actual working so I could attempt to work it iout myself.

But based on what you said am I essentially just entering my overseas tax AS the offset?

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(1) I used the Foreign Income Conversion Calculator on the ATO website using the annaul average exchange rate.
(2) No I had no Canadian Deductions as I have not yet completed their 2019 Tax return and I had only worked for 1 month for their 2018 return.
(3) Yes my Canada work place employs alot of Australians and they asked us to do it.
(4) Yes I believe so.

Thanks for your help so far @macfanboy , hopefully this response goes through!

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Taxicorn

Replies 0

@Kallan29 

 

The best and easiest way to calculate tax and medicare is to visit https://www.paycalculator.com.au/

 

Yes you are just entering it as the offset because it was the minimum between the two calcs.