Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX

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PART 4-5 - GENERAL

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Division 770 - Foreign income tax offsets

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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Even though an Act is repealed or amended by this Act, the repeal or amendment is disregarded for the purpose of doing any of the following under any Act or legislative instrument (within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(a) making or amending an assessment (including under a provision that is itself repealed or amended);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right or power, performing any obligation or duty or doing any other thing (including under a provision that is itself repealed or amended);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-C - Rules about payment of foreign income tax

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Rules about when foreign tax is paid

SECTION 770-130 When foreign income tax is considered paid - taxes paid by someone else

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770-130(1)
This Act applies to you as if you had paid an amount of *foreign income tax in respect of an amount (a taxed amount ) that is all or part of an amount included in your *ordinary income or *statutory income if you are covered by subsection (2) or (3) for an amount of foreign income tax paid in respect of the taxed amount.

770-130(2)
You are covered by this subsection for an amount of *foreign income tax paid in respect of a taxed amount if that foreign income tax has been paid in respect of the taxed amount by another entity under an *arrangement with you or under the law relating to the foreign income tax.

Example:

You are a partner in a partnership and the partnership pays foreign income tax on the partnership income.

770-130(3)
You are covered by this subsection for an amount of *foreign income tax paid in respect of the taxed amount to the extent that:

(a) the taxed amount is taken, because of section 6B of the Income Tax Assessment Act 1936 (the 1936 Act ), to be attributable to another amount of income of a particular kind or source; and

(b) foreign income tax has been paid in respect of the other amount of income; and

(c) the taxed amount is less than it would have been if that tax had not been paid.

Example:

Aust Co (an Australian resident) is the sole beneficiary of an Australian resident trust H and is presently entitled to all the income of trust H. Trust H owns shares in For Co (a foreign company). For Co pays a dividend to trust H and the dividend is subject to withholding tax in For Co's country of residence.

Trust H allocates to Aust Co, the dividend, as well as other Australian source income trust H earned in the year (none of which was subject to foreign income tax). Aust Co is treated as having paid the foreign income tax paid by For Co under subsection 770-130(3) . The foreign income tax is treated as paid in respect of the amount included in Aust Co's assessable income that is attributable to the dividend.

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