How do I report income from overseas?

Okay, let's break down how to report income from overseas, based on the legislation you've provided.

In Plain English

If you have an Australian loan debt related to higher education or apprenticeships, and you're earning income from overseas, you need to report that income to the Australian Taxation Office (ATO). The Overseas Debtors Repayment Guidelines 2017 and the Australian Apprenticeship Support Loans Rules 2023 outline how to do this.

Here's the gist:

1. Notices: You might need to give the Commissioner of Taxation a notice if you:

   • Leave Australia intending to stay away for 183 days or more.
   • Have been outside Australia for 183 days or more in a 12-month period.
   • Are a foreign resident with a HELP or Australian Apprenticeship Support Loan debt.

2. Working Out Your Foreign Income: You need to calculate your "foreign-sourced income." There are three methods to choose from:

   • Simple Self-Assessment: You take your total foreign income and subtract a standard deduction based on your occupation (if available from the ATO).
   • Overseas Assessed: You use the income amount assessed by a foreign tax authority. There are restrictions on when you can use this method (e.g., the assessment period must overlap with the Australian income year).
   • Comprehensive Tax-Based Assessment: You calculate your foreign income by subtracting all the deductions you would be entitled to if that income was taxable in Australia.

3. Currency Conversion: If your foreign income is in a foreign currency, you need to convert it to Australian dollars using the average exchange rate for the relevant financial year.

4. Telling the ATO: You must tell the ATO which method you used to calculate your foreign-sourced income. However, if your income (including foreign-sourced income) is low (no more than 25% of the minimum repayment income), you don't have to provide all the details, but you do need to declare that your income is below this threshold.

Detailed Explanation

The reporting of overseas income is primarily governed by the Higher Education Support Act 2003 (referred to as "the Act" in the Overseas Debtors Repayment Guidelines 2017) and the Australian Apprenticeship Support Loans Rules 2023, particularly concerning individuals with HELP debts or Australian Apprenticeship Support Loans who are either living overseas or earning foreign income.

1. Notices to the Commissioner:

• Leaving Australia: Under subsection 154-18(1) of the Act (mentioned in section 12 of the Overseas Debtors Repayment Guidelines 2017 and section 24 of the Australian Apprenticeship Support Loans Rules 2023), if you have a HELP debt or Australian Apprenticeship Support Loan and intend to reside outside Australia for at least 183 days, you must notify the Commissioner within 7 days of departure. The notice must include your name, date of birth, intended country of residence, and contact details (section 12 of Overseas Debtors Repayment Guidelines 2017 and section 24 of Australian Apprenticeship Support Loans Rules 2023).
• Absence from Australia: Subsection 154-18(2) of the Act (mentioned in section 13 of the Overseas Debtors Repayment Guidelines 2017 and section 25 of the Australian Apprenticeship Support Loans Rules 2023) requires you to notify the Commissioner if you've been outside Australia for at least 183 days in a 12-month period and weren't required to give notice when leaving. This notice must be given within 7 days of completing the 183 days and include similar details to the departure notice (section 13 of Overseas Debtors Repayment Guidelines 2017 and section 25 of Australian Apprenticeship Support Loans Rules 2023).
• Foreign Resident Income: Subsection 154-18(3) of the Act (mentioned in section 14 of the Overseas Debtors Repayment Guidelines 2017 and section 26 of the Australian Apprenticeship Support Loans Rules 2023) states that foreign residents with HELP debts or Australian Apprenticeship Support Loans must provide a notice relating to their income, including foreign-sourced income, for the income year.

2. Calculating Foreign-Sourced Income:

Section 6 of the Overseas Debtors Repayment Guidelines 2017 and section 19 of the Australian Apprenticeship Support Loans Rules 2023 outline the three methods for calculating foreign-sourced income:

• Simple Self-Assessment (Section 7 of Overseas Debtors Repayment Guidelines 2017 and section 20 of Australian Apprenticeship Support Loans Rules 2023): This method calculates foreign-sourced income as the total foreign income less a standard deduction. The standard deduction is based on the median ratio of work-related expenses to employment-related income for your occupation, as per the ATO Occupation Code. If your occupation doesn't have a code, the deduction is nil. The ATO Occupation Code is defined in section 4 of the Overseas Debtors Repayment Guidelines 2017 as the Salary and wage occupation codes 2018 published by the Australian Taxation Office in June 2018.
• Overseas Assessed (Section 8 of Overseas Debtors Repayment Guidelines 2017 and section 21 of Australian Apprenticeship Support Loans Rules 2023): This method uses the income assessed by a foreign tax authority for a 12-month period. However, it cannot be used if the assessment period doesn't overlap with the Australian income year, if multiple foreign tax authorities have assessed income for overlapping periods, or if the assessment has been used in a previous year.
• Comprehensive Tax-Based Assessment (Section 9 of Overseas Debtors Repayment Guidelines 2017 and section 22 of Australian Apprenticeship Support Loans Rules 2023): This method calculates foreign-sourced income as the total foreign income less the total deductions that would be allowable under Australian income tax law if the income were assessable in Australia.

3. Currency Conversion:

Section 10 of the Overseas Debtors Repayment Guidelines 2017 and section 23 of the Australian Apprenticeship Support Loans Rules 2023 specify that foreign currency amounts must be translated to Australian currency using the average exchange rate for the financial year that most closely corresponds to the income year.

4. Content of Notices Relating to Income:

Section 14 of the Overseas Debtors Repayment Guidelines 2017 and section 26 of the Australian Apprenticeship Support Loans Rules 2023 detail the information required in the notice relating to income. This includes your name, date of birth, country of residence, occupation, income amount (including foreign-sourced income), the method used to calculate foreign-sourced income, and, if the overseas assessed method was used, your foreign tax identification number. However, if your income (including foreign-sourced income) is no more than 25% of the minimum repayment income for the year, you only need to declare this fact.

Important Considerations:

• Approved Form: Notices to the Commissioner must be in the approved form (subsection 154-18(1), (2) and (3) of the Act). Section 15 of the Overseas Debtors Repayment Guidelines 2017 and section 27 of the Australian Apprenticeship Support Loans Rules 2023 clarify that the Commissioner can require additional information in the approved form under section 388-50 in Schedule 1 to the Taxation Administration Act 1953.
• Penalties: Failing to comply with these notice requirements can result in penalties, as Part III of the Taxation Administration Act 1953 applies to failures to comply with section 154-18 of the Act (section 154-90 of the Act).
• Interaction with Income Tax Law: Section 4(2) of the Overseas Debtors Repayment Guidelines 2017 states that expressions used in the guidelines that are also used in the Income Tax Assessment Act 1997 have the same meaning as in that Act. This means you may need to consult the Income Tax Assessment Act 1997 for definitions of terms like "ordinary income" and "statutory income".

This explanation should give you a solid understanding of how to report income from overseas in the context of HELP debts and Australian Apprenticeship Support Loans. Remember to consult the official legislation and seek professional advice from a tax advisor or the ATO for specific guidance related to your circumstances.