Foreign tax credit schemes under examination

Media release 2007/16

The Tax Office announced today it is investigating arrangements that seek to reduce tax on Australian income through the use of foreign tax credits.

Tax Commissioner Michael D'Ascenzo said the arrangement or variations are mainly marketed to financial institutions.

The arrangements involve the purchase of bonds by Australian financial institutions, from offshore banks to generate large foreign tax credits.

"We are concerned that financial institutions who participate in these arrangements may be claiming foreign tax credits they are not entitled to under double taxation agreements.

"The anti-avoidance provisions may apply to such arrangements and we are investigating further," Mr D'Ascenzo said.

A taxpayer alert TA 2007/3 was issued today and is available from www.ato.gov.au