INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART VII - PENALTY TAX  

SECTION 226AA   PENALTY TAX WHERE PART IVA APPLIES - FOREIGN TAX CREDITS  

226AA(1)   [Additional tax]  

If:

(a) for the purpose of making a foreign tax credit determination, the Commissioner has calculated the amount of a foreign tax credit that is allowable to a taxpayer; and

(b) in calculating the amount of the foreign tax credit allowable to the taxpayer, one or more determinations made by the Commissioner under subsection 177F(1) were taken into account; and

(c) the amount of the foreign tax credit that would have been allowable if those subsection 177F(1) determinations had not been made exceeds the amount of the foreign tax credit referred to in paragraph (a);

the taxpayer is liable to pay, by way of penalty, additional tax equal to the penalty percentage of the excess.

226AA(2)   [Tax equal to penalty percentage]  

If:

(a) the Commissioner makes a foreign tax credit determination to the effect that a foreign tax credit is not allowable to a taxpayer; and

(b) in determining that the foreign tax credit is not allowable to the taxpayer, one or more determinations made by the Commissioner under subsection 177F(1) were taken into account; and

(c) a foreign tax credit would have been allowable to the taxpayer if those subsection 177F(1) determinations had not been made;

the taxpayer is liable to pay, by way of penalty, additional tax equal to the penalty percentage of the amount of the foreign tax credit referred to in paragraph (c).

226AA(3)   [Year of income]  

For the purposes of this Part, additional tax payable by a taxpayer under subsection (1) or (2) is in respect of a year of income if:

(a) the additional tax is payable by the taxpayer in relation to an amount of a foreign tax credit that would have been allowable to the taxpayer if the subsection 177F(1) determinations referred to in paragraph (1)(c) or (2)(c) had not been made; and

(b) the foreign tax credit relates to assessable income, or another amount, derived by the taxpayer during the year of income.

226AA(4)   [Definitions]  

In this section:

foreign tax credit
means a credit within the meaning of Division 19 of Part III .

foreign tax credit determination
means a determination under Division 19 of Part III .

penalty percentage
means:

(a) subject to paragraph (b) - 50%; or

(b) if it is reasonably arguable that Part IVA does not apply - 25%.