- This Part contains information relevant for determining the Australian resident unit holder's entitlement to foreign tax credits under Division 18, Part III of the ITAA 1936.
- The foreign tax credit entitlement needs to be determined by the unit holder separately for each class of foreign income. The foreign tax credit for each class cannot be more than the Australian tax payable by the unit holder on that class of taxable foreign income. Due to these requirements Part A cannot simply identify the unit holder's share of foreign tax paid by the trustee as the amount to claim at item 19O (Foreign tax credits) in the unit holder's tax return.
Full details are set out in our publication How to claim a foreign tax credit 2007. - Foreign income categories
Part B assumes that 'passive income' and 'other income' are the relevant foreign income categories for foreign tax credit purposes under subsection 160AF(7) of the ITAA 1936 for managed funds. If this is not the case then additional information will need to be provided. - Passive income is defined in section 160AEA of the ITAA 1936.
- Foreign capital gains
Fund managers should only show foreign capital gains and attached foreign tax paid in Part B if the capital gain is deemed to be foreign source income under subsection 160AE(2) of the ITAA 1936.
Therefore do not show a foreign capital gain in Part B if:
- no foreign tax was paid in relation to that capital gain; or
- the foreign capital gain is not included in the net income of the trust estate.
- The separation of the foreign net capital gains that are included in passive income is necessary for determining the unit holder's foreign tax credit entitlement under subsection 160AE(2) and section 160AF of the ITAA 1936. For example, the unit holder may have offset losses against gross capital gains such that no foreign capital gain is ultimately included in the unit holder's assessable income under subsection 160AE(2). In these circumstances, the unit holder would have no foreign tax credit entitlement in relation to their share of the foreign tax paid by the trustee.