The Australian Taxation Office (ATO) has released a notice warning taxpayers to be honest about their foreign income.

The new taxpayer alert, TA 2021/2, sounds the alarm on people trying to pass off income earned overseas as gifts or loans from family or friends on their Australian tax returns.

Foreign income that the ATO is concerned taxpayers are trying to conceal includes:

• Overseas employment or business income
• Interest from foreign financial institutions or loans
• Dividends from foreign companies
• A capital gain on the disposal of a foreign asset (such as shares in a foreign company)
• Deemed amounts of foreign income in relation to interests in foreign companies or trusts

These illegal mechanisms for shielding foreign income are currently being investigated, while the ATO is actively engaging with taxpayers who have entered such arrangements to ensure that they pay the correct amount of tax.

Those who have been discovered concealing their interests in foreign assets or making false claims for deductions in their tax returns could face penalties such as sanctions under criminal law. The ATO is advising anyone who has omitted income from their tax return to come clean by filing an amendment or making a voluntary disclosure.

Source: Public Accountants