New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 (90 of 2002)

Schedule 10   Consolidation: consequential provisions for international tax

Income Tax Assessment Act 1936

1   Section 160AFE

Repeal the section, substitute:

160AFE Carrying forward excess foreign tax credits

(1) This section operates if the amount (the current foreign tax amount ) worked out under paragraph 160AF(1)(c) for a taxpayer for a year of income (the current year ) falls short of the amount worked out under paragraph 160AF(1)(d) for the taxpayer for the current year.

(2) The taxpayer's excess foreign tax credits from earlier years of income (see subsection (4)) are applied in accordance with subsection (3) to increase the current foreign tax amount.

(3) Apply those credits according to the following rules:

(a) only apply credits from the most recent 5 years of income ending before the current year;

(b) apply credits from an earlier year of income before applying credits for a later year of income;

(c) do not apply credits beyond the extent of the shortfall mentioned in subsection (1);

(d) do not apply credits to the extent that the credits have already been applied under a previous operation of this section.

(4) The taxpayer has excess foreign tax credits from an earlier year of income (the earlier year ) if the amount worked out under paragraph 160AF(1)(c) for the taxpayer for the earlier year exceeds the amount worked out under paragraph 160AF(1)(d) for the taxpayer for the earlier year. The amount of the credits equals the excess.

(5) This section operates separately in relation to each class of foreign income identified in subsection 160AF(7), as if the taxpayer's foreign income of that class for a year of income were the whole of the taxpayer's foreign income for that year.