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Even though an Act is repealed or amended by this Act, the repeal or amendment is disregarded for the purpose of doing any of the following under any Act or legislative instrument (within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(a) making or amending an assessment (including under a provision that is itself repealed or amended);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right or power, performing any obligation or duty or doing any other thing (including under a provision that is itself repealed or amended);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 considered not paid

SECTION 770-145 When foreign income tax is considered not paid - foreign DMT tax reduced by amount of benefit

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770-145(1)
This section applies if:

(a) an entity is:

(i) a * Group Entity of an * Applicable MNE Group; or

(ii) a * GloBE Joint Venture of an Applicable MNE Group; or

(iii) a * GloBE JV Subsidiary of a GloBE Joint Venture of an Applicable MNE Group; and

(b) the entity pays an amount of * foreign income tax imposed by a tax law of a foreign country; and

(c) the foreign income tax is * foreign DMT tax; and

(d) the entity, or another entity of a kind mentioned in subparagraph (a)(i) , (ii) or (iii) , is entitled to an amount of any of the following benefits in respect of the entity:

(i) a refundable tax credit (whether by way of cash or cash equivalent, or through an offset of unrelated, existing liabilities), to the extent that the tax credit is computed as an excess over the entity ' s income tax liability;

(ii) consideration received for the transfer of a transferable tax credit to which the entity was entitled in respect of foreign income tax of the foreign country;

(iii) cash or cash equivalent amounts recognised as government grants under * accounting standard AASB 120 (or, if that standard does not apply to the entity, a comparable accounting standard that applies to the entity under a * foreign law);

(iv) if the foreign country is specified in a determination under subsection (3) - a benefit of a kind specified in the determination in respect of the foreign country; and

(e) both of the following are in relation to the same * foreign tax period in relation to the entity:

(i) the foreign income tax;

(ii) the benefits.

770-145(2)
Despite anything else in this Division, this Act applies to the entity as if the amount of * foreign DMT tax were reduced by the amount of the benefit (but not below zero).

770-145(3)
The Minister may, by legislative instrument, make a determination specifying a benefit in respect of a specified foreign country.

770-145(4)
In making the determination, the Minister must have regard to the following:

(a) the extent (if any) to which the benefit has been designed to be available to * Applicable MNE Groups;

(b) the extent (if any) to which the benefit could increase the amount of * foreign DMT tax payable in the foreign country;

(c) the extent (if any) to which the benefit could increase the amount of a * tax offset under this Division;

(d) the nature of any other benefit specified in the determination.

770-145(5)
A reference in this section to a * Group Entity does not include a reference to a * GloBE Excluded Entity.

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