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Foreign income tax paid on amounts that are exempt or non-assessable non-exempt (NANE) income in Australia does not count towards a tax offset (except where the taxpayer derives NANE income under section 23AI or 23AK of the ITAA 1936).
Austco, an Australian-resident company, wholly owns Foreignco, which pays a dividend of $10m to Austco out of which foreign income tax of $2m is paid. The dividend is not paid out of previously attributed income. As the dividend is NANE income of Austco under section 23AJ of the ITAA 1936, the foreign income tax paid of $2m does not count towards Austco's tax offset.
Last modified: 23 Jul 2009QC 22894