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Item 20 - Foreign source income and foreign assets or property

Click this link for the information on Item 20 - Foreign source income on the ATO website.

Label E - Assessable Foreign Income

Assessable foreign pension/salary income: Is the gross income associated with amounts at labels T, L and D prior to any expenses incurred in earning that income and covers foreign salary or wages not subject to PAYG withholding and foreign pensions with or without an Undeducted Purchase price.

Assessable other foreign source income: Is the gross income associated with amounts at labels R, M and F prior to any expenses incurred in earning that income and covers foreign rental income, other foreign source income other than foreign salary or wages and foreign pensions or annuities, and Australian franking credits from a New Zealand company.

The sum of these two fields is integrated to label E Assessable foreign source income.

Label T - Other net foreign employment income

Foreign employment income is income you earned working overseas as an employee, other than foreign employment income shown on a PAYG payment summary - foreign employment. The PAYG payment summary - foreign employment income must be entered at item 1 Salary or wages. The Tax worksheet Overseas Pensions/Annuities and Salary Income worksheet (ove) is available at this label.

Exempt or Partially exempt salary and wages:

From 1 July 2017, if you are an Australian government agency employee (and not a member of a disciplined force), you must NOT include here income earned from delivering Australian official development assistance. You must enter this at Item 1. For more information, see item 1 of the Individual Tax Return instructions at

From 1 July 2016 Australian public service employees, who work overseas to provide Official Development Assistance (ODA), will no longer qualify for exemption from income tax under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936).

Members of Australian Defence Force (ADF), Australian Federal Police (AFP), State and Territory police forces delivering ODA will maintain their eligibility for the exemption.

The overseas salary or wages worksheet (ove) has been updated to contain a warning message in this regard.

Labels L and D - Foreign pension or annuity with and without an Undeducted Purchase Price

Most foreign pensions and annuities are taxable in Australia, even if tax was withheld from your payment by the country from which the payment came. Examples of foreign pensions and annuities that fall into this category are age and superannuation pensions paid from Austria, Germany, Italy, the Netherlands and the United Kingdom.

If your foreign pension or annuity is taxable, enter each transaction together with any expenses incurred and any amount of foreign tax paid in the Tax worksheet Overseas Pensions/Annuities and Salary Income worksheet (ove).

All amounts will be totalled and integrated to the relevant label L or D. If the amount is a loss, then the amount will be preceded by a hyphen and a /L will be printed on the paper print out.

A foreign income tax offset will be calculated if applicable.

Label R - Net Foreign Rent

Use the Tax Foreign Rental Property Schedule (ref) to calculate the Gross Assessable amount to be included at label E and to record income and expenses to arrive at net rental income/(loss) and to record any foreign tax paid. This worksheet may be accessed directly at label R. Refer to Foreign Rental Property Worksheet (ref).

Label M - Other net foreign source income

Use the Foreign income worksheet (for) to record Other foreign income transactions, including any Australian franking credits from a New Zealand company.

All foreign income, deductions and foreign tax paid must be translated to Australian dollars before completing this item. The Foreign Exchange rates to be used for the current income year are only updated for that year in the first Tax update issued following the general release as prior to that date they have not been published. The worksheet will calculate the amounts to be included at all relevant labels and any foreign tax credit entitlement. Where the result of foreign income less deductions is a loss, the loss will be integrated to the relevant label in the tax return.

Lump sum payments

For details click this link to open the Super lump sums from a foreign super fund and Super contributions - too much can mean extra tax on the ATO website.

Label F - Australian franking credits from a New Zealand Company

Use the foreign income worksheet Trans-Tasman Tab to record the details of all Australian franking credits from a New Zealand company that the taxpayer is entitled to, whether directly or by way of franked dividends (or franked non-share dividends) paid by the company, or indirectly through a trust or partnership.

Integration of the foreign income tax offset to label O

The total amount of allowable foreign income tax offsets claimable will be integrated from the 'for' worksheet to item 20 label O at the time of preparing the [F4] Estimate.

Label U - Net foreign employment income - payment summary

Click this link for the information on Item 20 - Foreign source income on the ATO website.

The amount at label U is defaulted from entries at item 1 of foreign employment income with the Code F including any additional entries made in the Additional PAYG Summary worksheet (egc) plus any amount of a lump sum payment in arrears on which foreign income tax has been paid less any amount included at items D1 to D5 that have been keyed in the dialog behind this label.

There may be an entitlement to a foreign income tax offset for the difference between the foreign tax paid and the Australian tax payable on that income.

The holding dialog at label U provides a breakdown of the amount at the label.

Label N - Exempt foreign employment income

Net Foreign Employment and Pension income amounts integrate from the Overseas Pension Income Worksheet (ove).

If you are using Exempt foreign income to absorb a current year loss, then enter the amount of that Exempt income required to absorb the loss as a deduction entry at either Fully Exempt or Partially Exempt foreign income and make a corresponding adjusting entry at Other Income, item 24 in the same amount. This will adjust the Exempt foreign income shown at label N and, together with the adjusting income entry at item 24, have the effect of reducing the taxable income.

Label O - Foreign income tax offset

When the foreign source income worksheet (for) is opened from label M or F then label O will be closed to data entry. Because of the complexity of the foreign tax credit calculation, integration to label O is only performed when you click [F4] to produce the Tax Estimate.

If you are not using the worksheets to record the detail behind foreign income and overseas pension income, and have entered amounts directly in the box ‘For calculation of estimate only’ then you should not enter an amount at label O even though it is available for data entry. When you click [F4] integration to Label O will be performed using the values entered for the calculation of the estimate.

You must rerun the estimate each time the amounts at this item are changed to refresh the value at label O.

[F4] function and Generic worksheets

It is possible to open a generic worksheet at label O. If a generic worksheet has been prepared at label O the [F4] function will not refresh the amount at label O. You must select Preparation > Delete Schedules and remove the entry called ‘foreign income tax offset field (E135)’ (which is the system generated name for the generic worksheet at label O).

Once the generic worksheet is removed, click [F4] and the estimate calculation will update the value at label O.

CCH References

4-490 Trans-Tasman triangular imputation rules

10-860 Earnings from foreign service

10-865 Calculation of tax on other income

14-420 Benefits from foreign superannuation funds

14-510 Taxation of non-superannuation annuities and foreign pensions

14-740 Foreign termination payments

21-060 Source of income generally

21-070 Source of particular classes of income

21-670 Scope of FITO

21-680 Entitlement to foreign income tax offset

21-710 Amount of foreign income tax offset

21-765 Tax paid on taxpayer’s behalf

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