As with your tax affairs generally, you need written evidence to support a claim for a foreign income tax offset, and you must keep such evidence so you can provide it to us on request. If we require information that is held overseas we will advise you in writing, giving you time to provide it.
If you use a tax agent to prepare and lodge your return, you need to advise them if you have earned any assessable income on which foreign income tax has been paid, and provide them with evidence of payment of the tax.
Written evidence
Written evidence of foreign tax paid should include the following details:
- the amount of foreign income or gains in the foreign currency
- the foreign tax year in which the income or gains were derived
- the nature and amount of foreign tax levied on the foreign income or gains
- the date on which the foreign tax was paid
- whether the tax paid represents an advance, instalment, or final foreign tax payment for the relevant foreign income or gains.
You should provide the best available evidence to show that foreign tax has been paid. You are not entitled to a credit for foreign tax if that foreign tax has been refunded to you.
The following documents are acceptable evidence of the payment of foreign tax:
- 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 of foreign income tax. If the foreign notice has no provision for a cash register receipt, taxpayers will be required to provide a separate receipt to indicate that the foreign tax liability has been paid. A notice of assessment which does not show that the foreign tax has been paid will not constitute sufficient proof that the tax shown on such a notice has been paid
- a certificate for deduction of withholding tax issued by the person who pays the interest, dividends or any other income that is subject to a deduction of foreign tax
- a distribution statement, or a similar document from a trustee of a managed fund or unit trust, stating the amount of foreign tax paid; for example, the details of foreign tax paid shown in trust distribution advices provided to beneficiaries or unit-holders will generally be sufficient to support a claim for a foreign income tax offset
- payslips, payment summaries or similar documents that shows the amount of foreign tax paid will be accepted where there is no requirement in a foreign country to lodge an income tax return
- a copy of the foreign income tax return, accompanied by a receipt verifying that the foreign tax, as calculated on the basis of the return, has been paid
- a letter from the relevant foreign tax authority stating all taxes for that income year have been paid.
You must keep the evidence
You don’t need to provide the written evidence with your tax return, but you must retain the original documents because we may need to see them at a later date.
Generally, you must keep records for five years after you prepared or obtained them, or after you completed the relevant transactions or acts, whichever is later.
We may generally amend an income tax assessment for an income year within two years of issuing the notice of assessment for that year in the case of individuals and very small businesses, or four years for other taxpayers.
This period of review may be extended by an order of the Federal Court of Australia or with your consent. Where this occurs, you must keep your records for five years or to the end of the period during which the assessment may be amended, whichever is later.
The period of review may also be extended by the effect of special amendment rules that allow an assessment to be amended within four years of a payment of foreign income tax or an increase or decrease in the tax paid.
You do not need to keep records where the Commissioner of Taxation has notified you that they are not required, or where your company has gone into liquidation and been finally dissolved.
We may ask you to get information from overseas
If we believe that information relevant to your assessment is held overseas, you may receive an offshore information notice asking you to get the information for us within 90 days.
If you need extra time, you should apply in writing before the time runs out.
Transitional rules for using excess foreign tax credits
Transitional rules allowed taxpayers to use certain excess foreign tax credits that existed when the foreign tax offset rules came into effect on 1 July 2008. A taxpayer had to use these pre-commencement excess foreign income taxes within five years of the year of income in which the pre-commencement excess foreign income tax arose. 2012–13 was the last year that any pre-commencement excess foreign income tax could be used.
These transitional measures are subject to a ‘sunset’ clause which will result in them being repealed with effect from 30 June 2014.