House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon. P.J. Keating, M.P.)

GENERAL OUTLINE

The Taxation Laws Amendment (Foreign Tax Credits) Bill 1986 will -

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amend the Income Tax Assessment Act 1936 to replace, with effect from the commencement of the 1987-88 income year, the various double taxation relief provisions of the income tax law with a general world-wide foreign tax credit system under which foreign source income (apart from certain salary and wages) derived by Australian resident individuals and companies will be subjected to Australian income tax. Credit for foreign income tax paid by the Australian resident on the foreign income will be allowed against, and up to the amount of, the Australian tax payable on that income (September 1985 Tax Reform announcement): and

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amend the Income Tax (International Agreements) Act 1953 to repeal those provisions relating to allowance of credit for foreign tax on certain income to which Australia's agreements for the avoidance of double taxation apply that will no longer be required once the general foreign tax credit system is in place.