If you are an Australian resident for tax purposes and you earned money overseas in 2025-26 – a salary, a pension, rent on a flat back home, dividends, interest or a gain on selling an asset – the ATO expects to see it in your Australian return, converted to Australian dollars using rates and rules it sets. Getting the conversion wrong is one of the most common errors we fix on returns with foreign income.

This guide explains what counts as foreign income, how the ATO’s conversion rules work (and the mistake most online guides make about “daily” rates), the 2025-26 average rates for the currencies our clients use most, how the foreign income tax offset stops double taxation, what double tax agreements actually do, and where it all goes in the 2025-26 return. It is checked against the ATO’s foreign exchange rates pages, its guide to foreign income tax offset rules 2026 and the question 20 instructions.

It is written for residents with overseas earnings, recent migrants with assets and income in their home country, and Australians who worked abroad for part of the year. For the offset itself in more depth, see our guide to the foreign income tax offset (FITO).

Foreign income and exchange rates at a glance

Currency	ATO average rate, year ended 30 June 2026 (per A$1)	A$ value of 10,000 units
British pound (GBP)	0.5056	A$19,778
US dollar (USD)	0.6785	A$14,738
Euro (EUR)	0.5817	A$17,191
Indian rupee (INR)	61.5272	A$163
New Zealand dollar (NZD)	1.1597	A$8,623
Canadian dollar (CAD)	0.9375	A$10,667

Source: ATO, Foreign exchange rates for the financial year ending 30 June 2026 (rates from the Reserve Bank of Australia, expressed as foreign currency per one Australian dollar). Checked 7 October 2026. Monthly rates for the year are at the ATO’s monthly rates page.

What counts as foreign income?

The ATO’s rule for residents is sweeping: “You must declare income you earn anywhere in the world in your Australian tax return.” Its worldwide income page groups it into employment and personal services income, business income, pensions, annuities and lump sums from overseas funds, investment income – rent from real estate, interest from bank deposits or bonds, dividends from shares – and capital gains on overseas assets. “You must convert all foreign income, deductions and tax offsets to Australian dollars in your tax return.”

Residency is the hinge. The ATO’s residency tests, including the 183-day test, decide whether you are taxed on worldwide income (resident), on Australian-sourced income only (foreign resident), or somewhere in between. Temporary residents – people here on most temporary visas who are not Australian residents under social security law – are a special case: the ATO says “most of your foreign income is not taxed in Australia”, although income from employment or services performed overseas while a temporary resident can be. If you hold a temporary visa, confirm your category before assuming your overseas rent or dividends are taxable here.

Exempt foreign employment income

A narrow exemption under section 23AG applies to continuous foreign service of 91 days or more in specified roles: delivering Australian official development assistance, operating a developing-country or public disaster relief fund, working for a prescribed charitable or religious institution, or deployment as a member of a disciplined force. It does not apply if you paid no tax overseas because of a treaty or because that country does not tax employment income. Even where it applies, the ATO says “you must still include it in your tax return” because exempt foreign employment income affects the rate of tax on your other income.

How to convert foreign income to Australian dollars

The ATO’s conversion rules apply to every tax-relevant foreign-currency amount – income, deductions and foreign tax paid. The default is the rate prevailing at the time of the transaction; for ordinary income the ATO specifies “the earlier of the time it is derived and the time it is received”. That means the date your employer paid you or your tenant’s rent landed, not the date you transferred money to Australia. Later movements in the exchange rate do not change the figure.

For regular income there is a practical alternative. The ATO’s general information on average rates allows you to use an average rate for a period you choose of up to 12 months, but only where it “is a reasonable approximation of the exchange rates that would otherwise be applicable”. The ATO’s own examples have Maria translating a year of Italian pension payments at the annual average rate and Veronica using the rate her Australian bank applied to her British pension. Its counter-example is John, who sells a large overseas asset in a single transaction: “it would not be appropriate for John to use an average rate of exchange.”

Type of income	Method the ATO guidance points to	Why
Monthly salary or wages from an overseas employer	Average rate for the period (monthly or annual), or each pay at the rate on the day	Regular stream; average is a reasonable approximation
Foreign pension or annuity paid monthly	Average rate for the year	ATO’s Maria example
Rent received monthly or quarterly	Average rate for the period	Regular stream
Dividends paid on a few dates a year	Rate on each payment date (ATO monthly rate for that month, or RBA daily rate)	Irregular, identifiable dates
Sale of overseas shares or property	Rate on the date of the CGT event (RBA daily rate)	One-off capital transaction – ATO’s John example
Foreign tax paid	Same method as the income it relates to	Consistency between income and offset

Which rates the ATO publishes – and which it does not

Since 1 January 2020 the ATO’s published rates come from the Reserve Bank of Australia. On its foreign exchange rates overview you will find monthly rates (updated at the start of the following month), rates at 30 June and 31 December each year, and financial-year and calendar-year averages. The ATO does not publish daily rates: its page directs you to the Reserve Bank’s exchange rate tables for a specific day. For a currency the ATO does not list, “you may use any reasonable externally sourced exchange rate for that currency” – a bank operating in Australia or another reliable source – and you should keep a copy of where it came from.

One trap: ATO rates are quoted as units of foreign currency per one Australian dollar. To convert to Australian dollars you divide, not multiply. £40,000 at the 2025-26 average of 0.5056 is £40,000 / 0.5056 = about A$79,114.

The foreign income tax offset: how double taxation is avoided

Declaring worldwide income does not mean paying tax twice. If you have paid foreign income tax on an amount that is included in your Australian assessable income, you can claim a foreign income tax offset. The ATO’s 2026 guide sets the conditions: “The foreign income tax must have been paid by you or be deemed to have been paid by you”, and the income must be in your Australian return.

• Up to $1,000: “you only need to record the actual amount of foreign income tax paid that counts towards the offset (up to $1,000)”. In myTax the figure is pre-filled where the foreign tax paid does not exceed $1,000.
• More than $1,000: you must work out an offset limit. Step one is your Australian income tax (including Medicare levy and surcharge) on everything; step two is the tax you would pay if the foreign income and related deductions were left out; the difference is the limit.
• Non-refundable, no carry-forward: “Once your tax payable has been reduced to nil, any unused FITO isn’t refunded to you and can’t be carried forward to later income years.” Foreign tax above the limit is simply lost.
• Time limit: “You have up to 4 years to request an amendment to your assessment from the date you paid the foreign income tax.”
• Records: a statement from the foreign tax authority, an official receipt or other document evidencing payment, kept for five years. You do not lodge it with the return but must produce it if asked.

Where double tax agreements fit

Australia has comprehensive tax treaties with, in the ATO’s words, “over 40 countries”. The ATO describes their purpose as reducing or eliminating double taxation “by allocating taxing rights between the jurisdictions over different categories of income” and preventing avoidance through information exchange. The full list – including India (1991 agreement and 2011 protocol), the United Kingdom (2003), the United States (1982 and 2001 protocol) and New Zealand (2009) – is maintained by Treasury at its income tax treaties page. A treaty can reduce the rate of foreign withholding on dividends or interest, decide which country taxes a pension, or deem you resident of one country when both claim you; it does not remove the obligation to declare the income in Australia. The offset does the heavy lifting on double taxation; the treaty sets who gets to tax what.

Where to report foreign income in your 2025-26 return

Foreign income sits in the supplementary section at question 20 Foreign source income and foreign assets or property; in myTax it is the Foreign income section under Income. “You must convert all foreign income, deductions and foreign tax you pay to Australian dollars before you complete this question.” The labels cover net foreign employment income shown on an Australian payment summary (U), exempt foreign employment income (N), other net foreign employment income (T), net foreign pension or annuity income without and with an undeducted purchase price (L and D), net foreign rent (R), other net foreign source income (M), total assessable foreign source income (E), Australian franking credits from a New Zealand company (F), the foreign income tax offset (O), and a yes/no question (P) on whether you owned assets outside Australia worth A$50,000 or more at any time in the year.

1. List every foreign income source and the dates and foreign-currency amounts received.
2. Choose the conversion method for each stream (average for regular income, date-of-receipt for one-offs) and record the rate source.
3. Convert gross income, allowable deductions and foreign tax paid to Australian dollars.
4. Enter the net amounts at the right question 20 labels and the foreign tax at label O; work out the FITO limit if foreign tax exceeds $1,000.
5. Answer the A$50,000 overseas assets question.
6. Keep payslips, pension statements, rental statements, foreign tax receipts and your rate screenshots for five years.

Capital gains on overseas assets are reported at the capital gains question, not question 20, with the cost base and proceeds each converted at the rate on their own dates – which is where exchange-rate movements themselves become part of the gain or loss. Our income tax calculator gives a quick view of the Australian tax on the combined figure.

Records: what the ATO expects

Written evidence must be kept for five years from the date you lodge. The ATO allows that records for expenses incurred outside Australia “can be in the language of that country”, but you may be asked to provide a certified translation. Keep the foreign payslips or payment summaries, pension and rental statements, bank records showing receipt, the foreign tax assessment or receipt, and a dated copy of the exchange-rate table you used. For a foreign tax offset the ATO specifically wants “a statement from the foreign tax authority setting out the particulars that would normally be recorded on a notice of assessment, a similar official receipt, or other document evidencing payment”.

Common mistakes

• Multiplying instead of dividing. ATO rates are foreign currency per Australian dollar. £1,000 at 0.5056 is about A$1,978, not A$506.
• Using the transfer date. The rate is fixed when the income was derived or received, not when you moved the money.
• Averaging a one-off. An asset sale, a bonus or an inheritance-related gain uses the rate on the day.
• Leaving out “already taxed” income. It must be declared; the offset handles the double tax.
• Claiming the offset for tax not yet paid, or claiming more than the limit and expecting a carry-forward.
• Forgetting the A$50,000 overseas assets question at label P.
• Not reporting a foreign bank account’s interest because it was small – it is still assessable and the ATO receives account data from treaty partners.

FAQ about foreign income and ATO exchange rates

Talk to a registered tax agent

Returns with foreign income involve two sets of rules, two tax systems and a conversion step that is easy to get backwards. Nanak Accountants prepares returns for migrants, expatriates and investors with overseas income and property across Australia, including tax returns in Melbourne. Call 1300 626 258 or book a free 15-minute consultation.

This article is general information only and is not personal tax advice. Conversion rules, the 2025-26 average exchange rates, foreign income tax offset rules and the question 20 labels were checked against ATO pages and Treasury’s treaty list on 7 October 2026.