Calculating worldwide income for study or training loans

About the guide

This guide will help you complete a non-resident foreign income schedule for foreign residents where an outstanding loan exists for a:

• Higher Education Loan Program (HELP)
• VET Student Loan (VSL)
• Trade Support Loan (TSL).

It will help you calculate their worldwide income and explain the methods for determining their income. It will show you how to work out deductions for expenses incurred when using the ‘comprehensive tax based’ method.

Who should use this guide

Tax agents − when using the ‘comprehensive tax based’ method for clients, can use this guide to determine:

• the most suitable method to calculate worldwide income
• the information required
• allowable deductions.

Digital service providers can use this guide to help develop software packages that allow tax agents to report worldwide income for HELP, VSL and TSL debtors.

Publications and services

To find out how to get a publication referred to in this guide, and for information about our other services, see order ATO publications.

General information about calculating worldwide income

Part and full year foreign residents for Australian taxation purposes are required to report their worldwide income if they had a HELP, VSL or TSL liability on 1 June of the relevant financial year.

Worldwide income is both their:

• repayment income
• foreign-sourced income while they are a foreign resident.

Foreign residents with worldwide income converted into Australian dollars exceeding the minimum repayment threshold will be liable to make a repayment of their HELP, VSL and TSL liability. Repayment may be in the form of a compulsory repayment or an overseas levy depending on how the worldwide income is made up.

Show all income for the period your client was a resident during the year, in their individual income tax return (IITR). That is, both Australian repayment income and any foreign-sourced income earned as an Australian resident for taxation purposes.

For the period your client was a foreign resident during the year, report all income earned from sources outside Australia in the Non-resident foreign income schedule. Continue to report any Australian income earned as a foreign resident in the income tax return (ITR).

Converting income to Australian dollars

All amounts must be converted to Australian dollars before being reported, using the average annual exchange rate for the financial year most closely corresponding to the relevant Australian financial year. For assistance converting the currency, you can use the foreign income conversion calculatorThis link opens in a new window.

How repayments are calculated

A client's worldwide income is used to determine any compulsory repayment or overseas levy that applies.

For more information about calculating worldwide income, see:

• Overseas obligations
• Higher Education Support Act 2003 – Overseas Debtors Repayment Guidelines 2017External Link
• Trade Support Loans Act 2014 – Trade Support Loan Rules 2014
• VET Student Loans Act 2016 - VET Student Loans Rules 2016External Link

Non-resident foreign income schedule

The schedule assists you to determine the foreign-sourced income component of your client's worldwide income.

The source country of foreign income code

You need to provide the code of the country or countries where your client has earned foreign-sourced income as a foreign resident during the relevant Australian financial year.

The foreign occupation codes

The foreign occupation codes available are based on the ATO salary and wage occupation codes. From the available occupations, select the closest matching foreign occupation from which your client earned most of their foreign-sourced income during the year.

If the occupation is not listed, or your client was not employed (for example, they were an investor, retired or a pensioner), select 999000 ‘Occupation not listed’. The foreign occupation description field will be automatically populated by your selection. Both fields must contain data.

Assessment methods

Select the foreign income assessment method.

There are 3 assessment methods available to determine your client's foreign-sourced income while they were a foreign resident:

• Simple self-assessment method
• Comprehensive tax-based assessment method
• Overseas assessed method

The overseas assessed method should not be used if:

• the period of assessment of a person's income by a foreign tax authority does not overlap the relevant Australian financial year (1 July to 30 June)
• multiple assessments of a person's income for periods of 12 months overlapping the relevant Australian financial year were made by tax authorities of different foreign countries
• the most recent assessment by a foreign tax authority has previously been used to calculate the foreign income.

The method your client chooses to determine their foreign-sourced income this year does not restrict their choice of method in a subsequent year.

To find out more about the various methods, see overseas obligations.

Simple self-assessment method

You must provide the following information when using the 'simple self-assessment' method.

Gross income

Provide the gross amount of foreign-sourced income your client earned while a foreign resident during the year.

In some cases, you may need to convert income to Australian dollars.

Deduction median rate

The standard deduction median rate for a selected occupation is based on the median ratio of work-related expenses to employment-related income.

Standard occupation deduction

The standard deduction is an amount determined by multiplying the standard deduction rate of an occupation by gross income.

If you have selected 999000 ‘Occupation not listed’ in the foreign occupation field (for example, if your client is an investor, retired or a pensioner), no standard deduction can be calculated. The standard deduction amount applied will be zero.

Depending on your client's personal circumstances, for example, if there are deductions that would be allowable under Australian tax laws, you may wish to use a different assessment method to determine the foreign-sourced income component of their worldwide income. For example, the comprehensive tax-based assessment method allows you to claim specific deductions relating to your client's income or financial circumstances.

Comprehensive tax-based assessment method

Under the comprehensive tax-based assessment method, you assess your client's total foreign income using Australian taxation rules. Foreign-sourced income is the difference between total (pre-tax) foreign income and the deductions that would be allowable under the Australian taxation system.

This method allows you to claim specific deductions as if your client were living and earning income in Australia.

You must provide the following information when using the comprehensive tax-based method:

• Gross foreign income
• Net foreign income
• Foreign deductions.

What to report at gross foreign income labels

Foreign-sourced income is income earned from outside Australia when your client was a foreign resident for tax purposes. For example, when working overseas.

You must report all the foreign-sourced income that your client earned during the relevant Australian income year as a foreign resident for Australian tax purposes in this section. You must do this even if tax was taken out in the country where they earned the income. Remember to report all foreign source income earned while an Australian resident in the IITR. For more information, see Foreign source income and foreign assets or property.

You must provide the gross amount (pre-tax amount) of your client's foreign income. The foreign income you need to report may consist of the following:

• Total salary or wages
• Total allowances
• Total government allowances
• Total pension income
• Total interest
• Total dividends
• Total other income.

Total salary or wages

Income from salary or wages includes:

• salary and wages
• commissions
• bonuses
• income from part-time or casual work
• parental leave pay
• amounts for lost salary or wages paid under
  • an income protection policy
  • a sickness or accident insurance policy
  • a workers compensation scheme.

Total allowances

Payments of income from working (other than salary or wages) include:

• employment allowances – for example, car, travel, meals, entertainment, tools, clothing, laundry and site allowances
• tips and gratuities
• consultation fees.

Total government allowances

Government allowances include allowances paid to your client by a foreign government that form part of their foreign-source income. For example:

• unemployment benefits
• sickness allowances
• education payments
• parenting payments
• other government provided income support.

Total pension income

Pensions include foreign government pension payments and superannuation income. Some types of government pensions are:

• age pension
• carer payment
• disability pension
• military pension.

Total interest

Foreign income may include any interest paid or credited to your client from any source outside Australia, including:

• interest from savings accounts, term deposits and cash management accounts
• interest from children’s savings accounts opened or operated with funds that were your client's or your client used as if they were theirs.

Total dividends

Foreign income may include dividends and distributions that were paid or credited to your client by foreign companies while they were a foreign resident such as:

• dividends applied under a dividend reinvestment plan
• dividends that were dealt with on behalf of your client
• bonus shares that qualify as dividends
• distributions by a corporate limited partnership
• dividends paid by a corporate unit trust
• dividends paid by a public trading trust
• dividends paid by a listed investment company.

Note: if dividends were received from an Australian company while your client was a foreign resident, this should be included in the Australian income tax return.

Total other income

Other income that may form part of foreign income includes income your client earned as a foreign resident such as:

• royalties
• bonus amounts distributed from friendly society income bonds
• scholarships, bursaries, grants or other educational awards
• income from activities as a ‘special professional’ that is not included elsewhere on this form (author of a literary, dramatic, musical or artistic work, inventor, performing artist, or active sportsperson)
• any balancing adjustment when your client stopped holding a depreciating asset (for example, because of its disposal, loss or destruction) for which you have claimed a deduction for depreciation or decline in value in previous years. A car, for example, is a depreciating asset
• payments made under an income protection, sickness or accident insurance policy where your client was self-employed and the payments replaced income, that have not already been included elsewhere.

What to report at net foreign income labels

Net foreign income (gross foreign income less expenses) is from overseas business and investments your client made as a foreign resident.

You must include net foreign income here.

Net business income

If your client derived foreign income as a foreign resident or incurred a foreign loss from any business carried on overseas include it here. This includes:

• income or loss from being a sole trader
• income or a loss from a primary production business
• income or loss of an independent contractor working under a labour hire arrangement
• income or loss as a performing artist in a promotional activity
• any other business income or loss.

Total personal services income

Complete this field if your client received foreign income for personal services provided as a foreign resident sole trader and they either:

• did not receive a personal services business determination in relation to their personal services income (PSI)
• did not satisfy the results test
• did not satisfy at least one of the other 3 personal services business tests (if less than 80% of their PSI came from each client).

Personal services income is income that is mainly a reward for an individual's personal efforts or skills. To work out whether your client's income is personal services income you can use the Personal services income toolOpens in a new window or see Personal services income for more information. To work out the net personal services income to report here, see Business and professional items.

Net partnership and trust income

If your client's foreign income is from partnerships or trusts, include it here. Include your client's share of both:

• primary production partnership income or loss
• non-primary production partnership income or loss.

If the partnership in which your client was a partner paid them salary, wages or allowances, you must show that income here.

If they received, or were entitled to, a distribution of trust income, you must enter that amount here.

Net capital gains

If the foreign income includes a capital gain or a capital loss made for an asset that is not taxable Australian property your client holds or held during the year, include it here.

Under Australian tax law, for most CGT events, your client makes a:

• capital gain if the amount of money and property they received, or were entitled to receive, from the CGT event was more than the cost base of the asset; they may then have to pay tax on the capital gain
• capital loss if the amount of money and property they received, or were entitled to receive, from the CGT event was less than the reduced cost base of the asset.

There is a wide range of CGT events. The most common CGT event happens when you sell or give away a CGT asset.

Net rent

Rental income

This is the foreign income earned when your client rents out their property (including renting out a room through a sharing economy website or app). You must include any bond money retained in place of rent or kept because of damage to the property requiring repairs. An insurance payout for lost rent, or a reimbursement of any rental expenses claimed in the relevant Australian income year, or claimed in an earlier year, must also be included as income.

Rental expenses

You can claim expenses relating to your client's rental property but only for the period the property was rented or available for rent, for example, advertised for rent.

Expenses can include:

• advertising for tenants
• bank charges
• body corporate fees
• borrowing expenses
• council rates
• decline in value of depreciating assets
• gardening and lawn mowing
• insurance
• land tax
• pest control
• property agent fees or commissions
• repairs and maintenance
• stationery
• phone
• water charges
• travel undertaken to inspect the property or to collect the rent.

If part of the property is used to earn rent, your client can claim expenses relating to only that part of the property. You will need to work out a reasonable basis to apportion the claim.

What to report at foreign deduction labels

Your client may be able to claim deductions for expenses incurred in earning their foreign income. For example, work-related expenses incurred while performing their job as an employee.

Any expenses claimed must reflect the expenses that would be allowable as a deduction if the foreign income was assessable in Australia and the same record keeping rules apply.

Total employee work-related deductions

You may be able to claim deductions for work-related expenses your client incurred while performing their job as an employee.

Generally, you incur an expense in a financial year when either you:

• receive a bill or invoice for an expense that you are liable for and must pay (even if you don’t pay it until after the end of the financial year)
• do not receive a bill or invoice, but you are charged, and you pay for the expense.

If an expense includes an amount of indirect tax such as a goods and services tax (GST) or a value added tax (VAT), the GST or VAT is part of the total expense and is therefore part of any deduction. For example, if your client incurred union fees of $440 which included $40 GST or VAT, they claim a deduction for $440.

Include here the following work-related expenses incurred as an employee:

• Car
• Travel
• Clothing
• Self-education
• Other expenses.

Car

Work-related car expenses are expenses incurred as an employee for a car your client either:

• owned
• leased
• hired under a hire-purchase agreement.

Travel

Work-related travel expenses are travel expenses your client incurred in performing their work as an employee. They include:

• public transport, including air travel and taxi fares when travelling for work
• bridge and road tolls, parking fees and short-term car hire when travelling for work
• meal, accommodation, and incidental expenses incurred while away overnight for work
• expenses for motorcycles and for vehicles with a carrying capacity of one tonne or more, or nine or more passengers, such as utility trucks and panel vans
• actual expenses (such as petrol, oil and repair costs) incurred to travel in a car that is owned or leased by someone else.

If the employer provided a car for your client or their relatives’ exclusive use and your client was entitled to use it for non-work purposes, your client cannot claim a deduction for its running costs (petrol or repairs). However, they can claim expenses such as parking and bridge and road tolls for work-related use of the car.

Clothing

Your client can claim expenses incurred as an employee for work-related:

• protective clothing
• uniforms
• occupation-specific clothing
• laundering and dry-cleaning of clothing listed above.

They can claim the cost of a work uniform that is distinctive (such as one that has the employer’s logo permanently attached to it). It must be a compulsory uniform that can be a set of clothing or a single item that identifies the individual as an employee of an organisation. There must be a strictly enforced policy making it compulsory to wear that clothing at work. Items may include shoes, stockings, socks and jumpers where they are an essential part of a distinctive compulsory uniform and the colour, style and type are specified in the employer’s policy.

Your client can also claim the cost of:

• occupation-specific clothing which allows people to easily recognise that occupation (such as the checked pants a chef wears when working) and which are not for everyday use
• protective clothing and footwear to protect from the risk of illness or injury, or to prevent damage to ordinary clothes, caused by the work or work environment. Items may include fire-resistant clothing, sun protection clothing, safety-coloured vests, non-slip nurse’s shoes, steel-capped boots, gloves, overalls, aprons, heavy duty shirts, trousers (but not jeans), protective equipment (such as hard hats and safety glasses)
• renting, repairing and cleaning any of the above work-related clothing
  (if your client did washing, drying or ironing, you can use a reasonable basis to calculate the amount, such as AUD$1 per load for work-related clothing, or 50 cents (AUD) per load if other laundry items were included).

Your client cannot claim the cost of purchasing or cleaning plain uniforms or clothes, such as black trousers, white shirts, suits or stockings, even if the employer requires your client to wear them.

Self-education

Your client can claim self-education expenses that are related to their work as an employee and which they incur when doing a course to get a formal qualification from a school, college, university or other place of education.

To claim a deduction for self-education expenses, your client must have met one of the following conditions when they incurred the expense:

• The course maintained or improved a skill or specific knowledge required for their work activities at that time.
• They could show that the course was leading to, or was likely to lead to, increased income from their work activities at that time.
• Other circumstances existed which established a direct connection between the course and their work activities at that time.

Your client cannot claim a deduction for self-education expenses for a course that:

• relates only in a general way to their current employment or profession
• will enable them to get new employment.

Your client cannot claim contributions they, or the Australian Government, made under the HECS-HELP, or repayments under the Higher Education Loan Program (HELP), the Student Financial Supplement Scheme (SFSS), the Student Start-up Loan (SSL), VET Student Loan (VSL) or the Trade Support Loan Program (TSL).

Examples of expenses your client can claim are:

• textbooks
• stationery
• student union fees, student services and amenities fees
• the decline in value of their computer
• certain course fees.

Other expenses

Other work-related expenses are expenses your client incurred as an employee and has not claimed above. These include:

• union fees and subscriptions to trade, business or professional associations
• professional seminars, courses, conferences and workshops
• reference books, technical journals and trade magazines
• safety items that protect from the risk of injury or illness posed by their work or work environment, such as hard hats, safety glasses and sunscreens
• the work-related proportion of some computer, phone and home office expenses
• tools, equipment and other assets (your client may be able to claim an immediate deduction for the full cost of depreciating assets costing $300 or less; for more information see Guide to depreciating assets).
  Your client cannot claim a deduction for the decline in value of items provided to them by their employer, or if the employer paid or reimbursed them for some or all of the cost of those items, and the item would have been exempt from the Australian fringe benefits tax.

For home office expenses, your client can either:

• keep a diary of the details of actual costs and work-related use of the office
• use a fixed rate of 45 cents (AUD) per hour for heating, cooling, lighting and the decline in value of furniture in the home office.

Total depreciation deduction

You may be able to claim a deduction for the decline in value of a depreciating asset which your client held during the financial year to the extent that they used it to produce income that you have reported in the non-resident foreign income schedule.

Depreciating assets include items such as tools, reference books, computers and office furniture.

You may be able to claim an immediate deduction for the full cost of depreciating assets costing $300 or less. Use the Depreciation and capital allowance toolOpens in a new window to work out the deduction if the cost is not fully deductible.

Total interest and dividend deduction

Interest

Include any allowable expenses that your client would be entitled to claim if the foreign income reported in the Non-resident foreign income schedule were assessable income in Australia. Expenses include:

• bank or other financial institution account-keeping fees for accounts held for investment purposes
• fees for investment advice relating to changes in the mix of your client's investments
• interest paid on money borrowed to purchase income-producing investments.

If they had a joint account or shared an interest-earning investment, claim only their share of the joint expenses.

If money was borrowed to purchase assets for private use and income-producing investments, you can claim only the portion of the interest expenses relating to the income-producing investments.

You can claim a proportion of the decline in value of your client's computer, based on the percentage of total computer use that related to managing investments. If your client has different investments, such as interest-earning investments and shares, claim this deduction only once.

Dividends

Include any expenses incurred earning the gross foreign dividends you reported.

Expenses include:

• fees for investment advice relating to changes in the mix of shares or similar investments
• interest incurred on money borrowed to purchase shares or similar investments
• costs relating to managing shares or similar investments, such as travel and buying specialist investment journals or subscriptions.

If your client had joint share investments or similar shared investments, you can claim only their share of joint expenses.

If your client borrowed money to purchase assets for private use and income-producing investments, they can claim only the portion of the interest expenses relating to the income-producing investments.

Your client can claim a proportion of the decline in value of their computer, based on the percentage of total computer use that related to managing their investments. If they have different investments, such as interest-earning investments and shares, claim this deduction only once.

Total UPP of a foreign pension

Your client may be entitled to claim a deduction to reduce their reported foreign pension or annuity income if the pension or annuity has an undeducted purchase price (UPP).

Only some foreign pensions and annuities have a UPP. The UPP is the amount they contributed towards the purchase price of their pension or annuity (their personal contributions). That part of the annual pension or annuity income, which represents a return to your client of their personal contributions is free from tax. This tax-free portion is called the deductible amount of the UPP, and it is usually calculated by dividing the UPP of the pension or annuity by a life expectancy factor, according to life expectancy statistics.

For more information on pensions from another country, see Deductible amount of undeducted purchase price of a foreign pension or annuity.

Total personal super contributions

Your client may be able to claim a deduction for personal super contributions made to a complying Australian superannuation fund or a retirement savings account (RSA) if:

• they satisfied the age-related conditions
• they gave a valid notice of intent to the fund or RSA provider, in the approved form, and advised them of the amount your client intends to claim as a deduction (they must give this notice on or before the day their foreign-sourced income is reported or 30 June in the relevant year, whichever is earlier)
• your client's fund or RSA provider acknowledged the valid notice
• your client's fund was not a
  • Commonwealth public sector superannuation scheme with a defined benefit interest
  • constitutionally protected fund or other untaxed fund that would not include the contributions in their assessable income
  • super fund that notified the Commissioner before the start of the financial year that they elected to treat all member contributions to the
    • super fund as non-deductible
    • defined benefit interest within the fund as non-deductible.

For more information, see Personal superannuation contributions.

Total other

If there are other expenses that would be allowable as a deduction if the foreign income was assessable, which your client has not been able to claim elsewhere in the Non-resident foreign income schedule, you can include them here.

For more information about what can be claimed, see Other deductions – note that this link takes you to the Australian income tax return information and that some items which are specific to Australian residents do not apply in your client's situation.

Prior year tax losses

If your client has a foreign tax loss from an earlier financial year which has not been claimed as a deduction, you can include it here.

There may be a foreign tax loss this year which you may be able to claim as a deduction. You must complete this section whether you are able to claim a deduction for the loss this year, or not.

If there are foreign tax losses from more than one earlier financial year you should generally deduct the earliest losses first.

To complete this field, you will need records of your client's tax losses from earlier financial years.

Overseas assessed method

You must provide the following information when using the overseas assessed method:

• Foreign tax return TFN equivalent
• Foreign tax return country code
• Foreign tax return financial year
• Foreign tax return start date
• Foreign tax return end date
• Foreign tax return taxable income.

Foreign tax return TFN equivalent

Each tax jurisdiction uses an identifier for their taxpayers, whether it is an identity number to access all government services, or an identifier specific to that nation's revenue agency. You need to include the identifier.

Foreign tax return country code

In most cases, the foreign tax country, or tax jurisdiction, will be the same country as your client's country of residence. However, if they live in a country that is different to the country that made the assessment, please ensure you select the country that made the overseas assessment.

Foreign tax return financial year

If the overseas income year is from 1 January to 31 December, select the relevant calendar year. If the overseas income year covers 12 months over two calendar years, select the later year. For example, for the 2017–18 income year, select 2018.

Foreign tax return start date

Provide details of the date the income year started for the country that made the assessment.

Foreign tax return end date

Provide details of the date the income year ended for the country that made the assessment.

Foreign tax return taxable income

Enter the income amount that appears on the foreign income tax assessment. That is, your client's income for taxation purposes according to the tax assessment received from a taxation authority of the foreign country that made the assessment.