The following relates to amounts carried forward to the 2008 income year. For amounts to be carried forward from the 2008 income year, the new rules will apply.
You will have an excess foreign tax credit for an income year if the amount of foreign tax you have paid in respect of a class of foreign income exceeds the Australian tax payable on that class of foreign income.
You may carry forward an excess foreign tax credit for the five income years immediately following the income year in which it arose. You may use an excess credit for a class of foreign income only if there is a credit shortfall for the same class of foreign income in a later year. A credit shortfall occurs if the credit allowed for a class of income is less than the Australian tax payable on that class of income.
If you incur a loss for a class of foreign income, you cannot claim a foreign tax credit for that class of income in that income year because the Australian tax payable for that class is nil. You may, however, carry forward the foreign tax credit to a later income year to apply to the same class of foreign income.
You are required to keep your own records of your excess foreign tax credits if you are carrying the credits forward to a later date.