Question

Jack is a resident taxpayer for Australian tax purposes. During the financial year 2020, Jack signed a contract with a TV channel on November 2019 and agreed to travel to other countries in December 2019 for filming a TV show. The fee of $ 10000 will be paid out to him once the show is released on TV in August 2020. Whether the amount of $10000 is the ordinary income for the 2019/2020 tax year? Explain the reason and give some relevant cases.

Answer 1

Ans: Yes,Jack should include the amount of $10000 in his taxable income for the 2019/2020 tax year.

Explanation:

As per Australian Tax laws, a resident of Australia has to declare on his return all the income earned worldwide. It means a Australian Resident is taxed on his or her worldwide Income. Therefore, reporting income from all sources is mandatory even if the income is earned overseas i.e foreign income.

Foreign income may inlude- Business activities, employment, investments, pension, etc

If the resident taxpayer has paid tax on the foreign income in that country then also he/she is required to report such foreign income as his/her taxable income in the return for the respective year. As per Guide to foreign income tax offset rules, the taxed paid in foreign country on such foreign income may be allowed as a credit or an offset under an Australian foreign income tax offset as per offset rules. That means there is no double taxation on the same income.

Jack is a resident of Australia and he has travelled to other countries in December 2019 regarding his contract for a TV show which is expected to be released in August 2020. $10000 will be paid to Jack once the show is released. Jack has to report thos foreign income of $10000 as his taxable income 2019/20 tax year. Any tax paid on such foreign income may be allowed as foreign income tax credit under Australian Foreign income tax offset guidelines.