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Hi Kellyn,

If your husband is an Australian resident, then he will be taxed on his worldwide income. This means that he must report all income received from foreign business activities in his Australian income tax return.

Income earned overseas may also be taxed by the country in which it was earned, however, ATO rules require he include the full amount (ie. the gross amount) before any foreign tax has been deducted. Any foreign tax paid on that income can then be used as an offset against Australian tax payable on that foreign income to avoid double taxation.

Your husband may have expenses associated with earning the foreign income. These can be claimed as tax deductions however, again, there is a limit to the amount of expenses he can claim in any year. The deductions he can claim is limited to the amount of foreign income that your husband received. If expenses exceed the foreign income, then he will need to carry them forward to future years.

The second part of your question about what to do taxation-wise is more complex and it would depend on what he intends to do and aslo on the business structure he elects if he wants to do it as a business ie. sole trader, partnership, company etc. So for this part I suggest he sits down with an accountant to discusss the finer details.

Regards Tai
Trinity Accounting Partners
Ph: (02) 9045 1511
Website: http://www.trinity-accounting.com.au