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ATO Targeting Foreign Source Income

The Australian Taxation Office (“ATO”) has revealed that they will be vigilantly targeting offshore income in their recent compliance program.  The Commissioner of Taxation has launched a new initiative that allows eligible taxpayers to voluntarily disclose any undeclared foreign income until December 2014.  The ATO has stipulated that “if we detect you first, you will be exposed to the full force of the law, including severe penalties.”

The ATO has highly sophisticated data matching mechanisms that allow Australian officials to exchange information with international institutions and includes the facilitation of automatic logging and tracking of financial transactions.  Australian and international taxation authorities are increasingly focused on global taxation transparency.

 The ATO defines foreign employment income as income you derive as an Australian resident working overseas as an employee.  Foreign earnings may include any salaries, wages, commissions, bonuses and allowances.  Generally, you must declare all foreign employment income you earn that is exempt from Australian tax as it may be taken into consideration to calculate the tax liability on your assessable income. 

 Generally, Australian residents are taxed on their worldwide income, subject to any applicable exemptions.  To identify your tax situation you must ascertain whether you are an Australian resident for tax purposes. 

 From 1 July 2009, there are limited exemptions for foreign employment income from particular types of foreign service. 

If your foreign service is not directly attributable to the exempt activities, you will need to include the foreign employment income in your tax return as assessable income.

You may also be entitled to a foreign income tax offset for any foreign tax liability you have incurred. 

Taxation law is perhaps the most complex and consequential area of practice.  It is important that you engage an experienced taxation law solicitor to properly advise you in respect of your position pertaining to any potential foreign source employment income, correspond with the ATO on your behalf and construct a voluntary disclosure that seeks to properly declare all required income.  Penalties and interest may otherwise be significant.

This webpage (and any material or wording appearing on this webpage) is provided for general information purposes only and does not constitute any Legal Advice. It does not take into account your objectives, your instructions or all of the relevant facts and/or circumstances. Navado accepts no responsibility to any person who relies on the information provided on this website. We further refer you to our Disclaimer.

 Navado Lawyers & Solicitors has the expertise to assist you with your taxation law matter.  To discuss your legal matter with a Sydney Taxation Lawyer, please contact Navado Lawyers Sydney by phone on 02 9233 4048 or email us at  This article was published by Sandra Mezher, Tax Solicitor Sydney.


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