# Are US IRA and 401 accounts listed as foreign income for Australia



## Aus2oz (May 11, 2012)

Hi. 
I migrated to Australia from the US. I still received income from my US employer working for them remotely for about 3 months after my arrival. During that time my payroll in the US continued, including 401 contributions, pre-tax health insurance deductions and US tax withholdings.

1. How do I record foreign income in my Australia income tax return - should it be grosss earnings minus pre-tax contributions (401 and health)? 
Any insight would be appreciated. Am i supposed to pay tax on my 401 contributions incurred after I arrived in Australia?

2. When I file taxes in Australia, eTax manual says I have to put actual foreign taxes paid. But I can't file my US taxes without knowing the taxes I paid in Austraia (so I can claim foreign tax credits in my US taxes). So how do I file Australia taxes? Which is first US or Australia? I have already filed an extension for US taxes.

Any help would be appreciated.


----------



## Bevdeforges (Nov 16, 2007)

I know nothing about Australian taxes but one comment on the US side of your situation.

You do have to file for an extension on your US taxes if you're planning on using the FEIE - until you have fulfilled the requirements for either the bona fide resident test or the physical presence test. But as far as the tax credit is concerned, US taxes work on a cash basis. So, unless you actually pay your Australian taxes before December 31st of the year, you won't be able to take the credit for the tax on your US forms. 
Cheers,
Bev


----------



## BBCWatcher (Dec 28, 2012)

Here's how I think it works:

1. Aren't you getting a W-2 or 1099 for that U.S. income? That's almost always the income number you would report, straight from that form. However, if there's a tax treaty -- and I think there is -- you should probably take a quick look to see if anything is excludable.

2. On your Australian tax form for 2012 you would presumably report U.S. (foreign) taxes _paid in 2012_. Any Australian taxes you pay in 2013 aren't part of 2012, so you wouldn't report them on a 2012 U.S. tax return. Instead you'd be reporting them on your 2013 U.S. tax return.

Keep it simple, in other words, because it is: if you pay foreign taxes in Year X they get reported on the Year X tax return (which is due in Year X+1). That works in both directions (assuming Australia is like the U.S.): taxes aren't paid until they're paid, and they're reported in the tax filing for the year in which they were paid.

OK, then what do you do if you pay Australian taxes in 2013 but you don't have U.S. source income in 2013, so you have no way of recovering those taxes paid in 2013 (which relate to tax owed on income you received in 2012)? And the answer is the U.S. Foreign Tax Credit allows you to apply excess foreign tax credits backwards up to one year and forwards up to 10, so that'd be one way to do it after-the-fact.

This could ping-pong a bit, so "it gets interesting." (A tax refund from the U.S. could be considered Australian income, etc.) But conceptually that's how it works.


----------

