Foreign income can be captured as Target Foreign Income pursuant to Section 43 of the Child Support (Assessment) Act 1989 and Section 10A of the Social Security Act 1991. Target Foreign Income is the total of the amount of the parent’s foreign income as defined in Section 10A of the Social Security Act 1991 that is neither taxable income or received as a fringe benefit as defined by the Fringe Benefit Tax Assessment Act 1986 and any other amount of the parent’s income that is exempt from tax under Sections 23AF and Sections 23AG of the Income Tax Assessment Act 1936 less the amount of losses and outgoings incurred. This component of your income will only become known to the Child Support Registrar if it appears in your taxation return, meaning you have declared it voluntarily. It is also possible that this income may be ascertained upon any application made for a variation of child support assessment by the payee.
There are many types of target foreign income.
Australian residents who are employed outside Australia whose foreign employment income is not taxable in Australia, including, foreign based airline pilots and engineers, employees of international organisations such as the United Nations, and employees of approved overseas projects, residents who receive gifts or allowances of money from any foreign source on a regular basis, including those receiving regular money or gifts from relatives living overseas, residents who receive income from foreign business interests or investments which are exempt from Australian tax, including migrants with business interests in their country of origin, newly arrived migrants who received foreign income in the reference tax year that is not subject to tax in Australia, non-residents, partnered to Australian residents, working in Australia for overseas companies, organisations or governments, including civil servants and defence personnel posted to Australia, non-residents working temporarily at Australian education institutions or visiting students, and residents who receive an overseas pension or benefit that is not taxable income under the Australian Income Tax Assessment Act.
Assessing target foreign income
When new claims or reassessments are made, applicants are asked to state the amount of target foreign income received in the reference tax year. The Australian tax year is used, even if this is different from the source country's tax year. Applicants with income from foreign business interests can deduct allowable business expenses from that income amount. Discretion is needed when deciding to verify an applicant's declared target foreign income. If an applicant is unsure whether the foreign income is taxable in Australia, the ATO can clarify the applicant's taxation status.
Target foreign income is added to the applicant's assessable income after it is converted to Australian dollars. The conversion rate is the 'on demand airmail buying rate', available at the CBA on 1 July for the tax year in which the income was received.
If foreign income cannot be accessed in Australia, it is not income for social security purposes.
There are double taxation agreements between Australia and some other countries that are similar to the social security reciprocal agreements. These agreements avoid the dual payment of tax in each country on the same income. If a foreign income amount has already been included in an Australian tax return as a result of a double taxation agreement, it is NOT to be counted again as foreign income.
Income from foreign business interests
Applicants with income from foreign business interests will be able to deduct business expenses from that income amount. Allowable business deductions will be broadly the same as those allowed under the Australian Taxation Act.