CHAPTER 4
-
INTERNATIONAL ASPECTS OF INCOME TAX
History
Chapter 4 inserted by No 162 of 2001.
PART 4-5
-
GENERAL
History
Part 4-5 inserted by No 162 of 2001.
Division 770
-
Foreign income tax offsets
History
Div 770 inserted by
No 143 of 2007
, s 3 and Sch 1 item 1, applicable in relation to income years, statutory accounting periods and notional accounting periods starting on or after the first 1 July that occurs after 24 September 2007.
No 143 of 2007
, s 3 and Sch 1 Pt 6 contains the following savings provisions:
Part 6
-
Savings provisions
Object
225
The object of this Part is to ensure that, despite the repeals and amendments made by this Act, the full legal and administrative consequences of:
(a)
any act done or omitted to be done; or
(b)
any state of affairs existing; or
(c)
any period ending;
before such a repeal or amendment applies, can continue to arise and be carried out, directly or indirectly through an indefinite number of steps, even if some or all of those steps are taken after the repeal or amendment applies.
Making and amending assessments, and doing other things, in relation to past matters
226
Even though an Act is repealed or amended by this Act, the repeal or amendment is disregarded for the purpose of doing any of the following under any Act or legislative instrument (within the meaning of the
Legislative Instruments Act 2003
):
(a)
making or amending an assessment (including under a provision that is itself repealed or amended);
(b)
exercising any right or power, performing any obligation or duty or doing any other thing (including under a provision that is itself repealed or amended);
in relation to any act done or omitted to be done, any state of affairs existing, or any period ending, before the repeal or amendment applies.
Example:
For the 2006-07 income year, Smart Investor Pty Ltd, an Australian resident private investment company, has assessable foreign income in the passive income class on which it has paid foreign tax for which it wishes to claim a foreign tax credit. The company also has a tax loss for the year from its Australian investments. When it lodges its tax return for the year it does not elect to claim a deduction for any of the tax loss under section
79DA
of the ITAA 1936, because the Australian tax payable on its passive foreign income equals the foreign tax it has paid.
In 2009 the amount of foreign tax payable in respect of some foreign rental income it had included in its return for the 2006-07 year is reduced and Smart Investor receives a refund of the difference in foreign tax. Smart Investor Pty Ltd then applies to be able to make an election under section
79DA
, that is, after the
Tax Laws Amendment (2007 Measures No 4) Act 2007
(which repeals section
79DA
) receives Royal Assent. The Commissioner allows Smart Investor to submit an election to claim a deduction for so much of its 2006-07 tax loss as to reduce the amount of Australian tax payable on its 2006-07 assessable foreign income to the revised foreign tax paid, by the end of 2009.
Despite the repeal of section
79DA
, item 226 allows the Commissioner to permit an election to be lodged after the return for 2006-07 has been lodged, and to amend Smart Investor
'
s assessment for that year, because these actions relate to a thing done, and period ending, before the repeal of section
79DA
applies.
Subdivision 770-A
-
Entitlement rules for foreign income tax offsets
History
Subdiv 770-A inserted by
No 143 of 2007
, s 3 and Sch 1 item 1, applicable in relation to income years, statutory accounting periods and notional accounting periods starting on or after the first 1 July that occurs after 24 September 2007. For savings provisions, see note under
Div 770 heading
.
Basic entitlement rule for foreign income tax offset
SECTION 770-10
Entitlement to foreign income tax offset
770-10(1)
You are entitled to a *tax offset for an income year for *foreign income tax. An amount of foreign income tax counts towards the tax offset for the year if you paid it in respect of an amount that is all or part of an amount included in your assessable income for the year.
Note 1:
The offset is for the income year in which your assessable income included an amount in respect of which you paid foreign income tax
-
even if you paid the foreign income tax in another income year.
Note 2:
If the foreign income tax has been paid on an amount that is part non-assessable non-exempt income and part assessable income for you for the income year, only a proportionate share of the foreign income tax (the share that corresponds to the part that is assessable income) will count towards the tax offset (excluding the operation of subsection
(2)
).
History
S 770-10(1) amended by No 110 of 2021, s 3 and Sch 2 item 12, by repealing note 3, effective 1 October 2021 and applicable in relation to assessments for the 2023-24 year of income and later years of income. Note 3 formerly read:
Note 3:
For offshore banking units, the amount of foreign income tax paid in respect of offshore banking income is reduced: see subsection 121EG(3A) of the
Income Tax Assessment Act 1936
.
Taxes paid on section 23AI or 23AK amounts
770-10(2)
An amount of *foreign income tax counts towards the *tax offset for you for the year if you paid it in respect of an amount that is your *non-assessable non-exempt income under either section
23AI
or
23AK
of the
Income Tax Assessment Act 1936
for the year.
Note 1:
Sections
23AI
and
23AK
of the
Income Tax Assessment Act 1936
provide that amounts paid out of income previously attributed from a controlled foreign company or a foreign investment fund are non-assessable non-exempt income.
Note 2:
Foreign income taxes covered by this subsection are direct taxes (for example, a withholding tax on a dividend payment) and not underlying taxes, only some of which are covered by section
770-135
.
Exception for certain residence-based foreign income taxes
770-10(3)
An amount of *foreign income tax you paid does not count towards the *tax offset for the year if you paid it:
(a)
to a foreign country because you are a resident of that country for the purposes of a law relating to the foreign income tax; and
(b)
in respect of an amount derived from a source outside that country.
Exception for previously complying funds and previously foreign funds
770-10(4)
An amount of *foreign income tax paid by a *superannuation provider in relation to a *superannuation fund does not count towards the *tax offset for the year if:
(a)
the tax was paid in respect of an amount included in the fund
'
s assessable income under table item 2 or 3 in section
295-320
; and
(b)
the provider paid the tax before the start of the income year.
Note:
Table items 2 and 3 in section
295-320
include additional amounts in the assessable income of superannuation funds that change their status from complying to non-complying or from foreign to Australian.
Exception for credit absorption tax and unitary tax
770-10(5)
An amount of *credit absorption tax or *unitary tax you paid does not count towards the *tax offset for the year.
History
S 770-10 inserted by
No 143 of 2007
, s 3 and Sch 1 item 1, applicable in relation to income years, statutory accounting periods and notional accounting periods starting on or after the first 1 July that occurs after 24 September 2007. For savings provisions, see note under
Div 770 heading
.
View history note
Hide history note