Foreign tax credit



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The foreign tax credit is the credit you can claim on the amount included in your assessable income for the distribution made by the non-resident trust.

Example 6
Non-broad-exemption country trust estate

During the 1997-98 income year, a resident individual received a distribution of $10,000 from a non-broad-exemption listed country trust estate. The entire amount was included in the taxpayer's assessable income under section 99B. The distribution was paid from $20,000 foreign income derived by the trust in the 1990-91 income year. The income was not subject to tax in a broad-exemption listed country and the trust paid foreign tax of $5,000.

Interest is payable on the distributed amount of $10,000 grossed up by the amount of foreign tax relating to the distributed amount - $3,333 - multiplied by the applicable rate of tax - 47% - less the amount of foreign tax credit.

($13,333 x 47% ) - $3,333 = $2,934

Note: The foreign tax credit is worked out by allocating, on a pro rata basis, the foreign tax paid by the trust estate on its foreign income. The profits and income of the trust estate that were available for distribution were:

$20,000 - $5,000


Amount of the distribution


Foreign tax attributable to the distribution=


$10,000 x $5,000


Last modified: 05 Dec 2006QC 17522