Did you know that Australian residents are taxable on their worldwide income?

Some income may be protected to some extent from ‘double taxation’ in Australia if you are already  taxed in the source country. This can happen through an Australian offset for foreign tax paid or through exemption under a tax treaty between Australia and that other country.

However, if you omit foreign sourced income from your tax return in Australia, then the ATO has at least FOUR YEARS after the issue date to amend your assessments. If they argue ‘fraud’ or ‘evasion’ in your not reporting that income, then they have NO LIMITS on the amendment period. If you don’t lodge returns, the ATO can issue ‘default assessments’ against you on that unreported foreign income.

There is a significant risk that the ATO will find any such foreign income that you are receiving, given the ATO’s increasing access to exchanges of information from foreign tax administrations through Australia’s tax treaties and their access to data from Australian financial institutions through AUSTRAC (Australia’s financial transaction reporting agency).

If the ATO amends your earlier assessment or issues default assessments for omitted foreign sourced income, they can impose significant penalties (up to 90%) of the amount of tax, plus charging statutory interest. If you make a voluntary disclosure before an audit or significantly assist the ATO during an audit, then these penalties may be substantially reduced – if you manage the contacts with the ATO to secure your position.

If you are an Australian resident with offshore investments, you should seek advice to determine whether you have tax obligations here from that income and, if you find that you haven’t properly reported that income to the ATO, you should get help to engage with the ATO to get the best possible outcome in your circumstances.

Remember, it’s never too late to make a voluntary disclosure.