The government has amended the law (refer to Miscellaneous amendments to taxation laws 2011) to allow you to apply any remainder of your foreign income tax offset (FITO) for an income year against your liability to pay Medicare levy, and if any remains, to reduce any liability to pay Medicare levy surcharge for that income year. Your foreign income tax offset is first applied against your tax payable before it is applied to your Medicare liabilities.
This applies regardless of whether Australia has a tax treaty with the foreign country in which the tax was paid.
The changes apply for 2008-09 and later years.
How does this differ from the previous law?
Your foreign income tax offset could only be applied against your liability to pay Medicare levy and Medicare levy surcharge if the foreign income tax offset arose from paying tax in a country with which Australia had a tax treaty.
This view was confirmed in ATO Interpretive Decision ATO ID 2011/75 Allowance of credit for tax paid in Papua New Guinea, against Australian tax payable, including Medicare Levy, published 23 September 2011.
What about flood levy?
For 2011-12 only, if you paid foreign tax in a country with which Australia has a tax treaty, you are entitled to a further credit, in the form of a foreign income tax offset, against your liability to pay the temporary flood and cyclone reconstruction levy (flood levy) imposed on that foreign income. Your foreign income tax offset is first applied against your tax payable, then your Medicare liabilities, and any remaining offset will be applied against your flood levy liability.
For more information about how to request this further credit, refer to Guide to foreign income tax offset rules 2011-12.
Are you exempt from paying Medicare?
Paying tax in a foreign country does not exempt you from the Medicare levy. However, you are entitled to apply any excess foreign income tax offset against your Medicare liabilities, which may reduce or eliminate the amount of Medicare payable. The excess is the amount remaining after first applying the foreign income tax offset against your tax payable.
When will our system be updated?
We have applied the foreign income tax offset against the Medicare levy and Medicare levy surcharge in all individual tax returns lodged or amended from July 2012.
We conducted a bulk amendment process in November 2012 to amend as many prior year assessments as possible. You did not need to do anything to be included in this bulk amendment process.
If you were included in our bulk amendment process, you or your tax agent at that time would have received a letter stating which years we were amending. For more information, refer to 'Where did we send your letter, amended assessment and refund?'.
We were not able to amend assessments as part of this bulk amendment process if any of the following applied:
- We did not have a valid and current address for you - you can update your address details and ask us to amend. See How do you amend an assessment?
- Your assessment had already been amended or was in the process of being amended - no further action is required as any excess foreign income tax offset will be applied against your Medicare liabilities.
- You have claimed a credit for tax paid by the trustee at label 13S on the supplementary section of your tax return. You can ask us to amend the trustee assessment and the beneficiary assessment.
- You were listed as a non-resident on our system - non-residents are generally not eligible to claim the foreign income tax offset.
- The time limit for amending for a particular income year had expired - you can ask us for an extension of time to lodge a late objection.
We pay interest on amendments that result in a refund. Some assessments may be delayed if we have to manually calculate interest.
When to expect your amended assessment
We have now completed most amendments that were included in the bulk amendment process conducted in November 2012.
Priority was given to the largest amendments. If your amendment is for:
- more than $100 - you should have received your amended assessment by the end of December 2012
- between $10 - $100 - you can expect an amended assessment by the end of February 2013
- less than $10 - you can expect an amended assessment by the end of April 2013.
Where did we send your letter, amended assessment and refund?
We sent you a letter if you used e-tax or lodged a paper return. If you used a tax agent to lodge your return, we sent a letter to the tax agent. Your amended notice of assessment and statement of account went to your postal address.
If you requested an amendment and it is processed separately to our bulk amendment process, you may get a second amendment notice showing no change to your assessment. This is because the foreign income tax offset will have already been applied to your Medicare liabilities.
If you receive a second amendment notice showing no change, you do not need to do anything.
How do you amend an assessment?
If your assessment was not included in our bulk amendment process, you can ask us to amend your assessment.
You can send your amendment request by:
- fax to 1300 730 239 with the description 'FITO - Medicare levy'
- mail to
- Tax Agent Portal - reference 'FITO-Medicare levy'
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If you send us an amendment request outside the time limit, we are currently unable to amend your assessment. We will send you a letter advising you that you need to lodge a late objection instead.
Proposed changes to the tax law
However, the Government has released a proposal to change the law to allow us to amend assessments where the time limit for amending has expired. If this proposal becomes law we will conduct another bulk amendment process to amend as many of the remaining prior year assessments as possible. You do not need to do anything to be included in this bulk amendment process.
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You must include:
Your full name
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Your date of birth
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Your contact details
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Your tax file number
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Years you want to amend
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Amounts of foreign tax paid in undertaking foreign employment, and confirmation that the foreign tax liability is paid and finalised.
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If applicable, the revised foreign income tax offset amount at label 20O of the supplement to the tax return - see Do you need to review the FITO amount at label 20O?
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Any additional information or documentation showing the correct information.
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All amendment requests need signed and dated declarations as outlined below:
- If you are making your own amendment request you must sign and date the request and state the following
- I declare that the information provided, and any attached documents, is true and correct.
- If your tax agent or representative is making the amendment request on your behalf they must sign and date the request and state the following
- I certify this document and any attached documents, have been prepared in accordance with the information supplied by the individual or entity identified in this request and in the attached documents.
- I have received a declaration from the individual or entity identified in this request and in the attached documents, stating that the information provided in each document is true and correct.
- I am authorised by the individual or entity identified in this request and in the attached documents, to submit this request to the Commissioner.
Do you need to review the FITO amount at label 20O?
Before requesting an amendment you should review the foreign income tax offset (FITO) amount claimed at label 20O of the supplement to your individual tax return. We have identified situations where this amount is incorrect. We base amendments on this amount so it must be correct.
The two most common situations are when the foreign income tax offset amount:
- exceeds the sum of the tax payable, Medicare levy and Medicare levy surcharge (and equals the foreign tax paid)
- is exactly equal to the tax payable.
For more information, see How do you calculate the FITO amount?
How do you calculate the FITO amount?
If you paid $1,000 or less in foreign tax, your foreign income tax offset (FITO) amount will equal the amount of foreign tax paid.
If you paid more than $1,000 in foreign tax, you must work out your foreign income tax offset limit. For more information, refer to Guide to foreign income tax offset rules.
More information
For more information, refer to Guide to foreign income tax offset rules 2011-12.
Last Modified: Wednesday, 20 February 2013