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  • Applying a foreign income tax offset against Medicare levy and Medicare levy surcharge

    You can apply any remainder of your foreign income tax offset (FITO) for an income year against your liability to pay Medicare levy.

    If any remains after that, you can also reduce any liability to pay the Medicare levy surcharge for that income year.

    Your FITO is first applied against your tax payable before it is applied to your Medicare liability.

    This applies regardless of whether Australia has a tax treaty with the foreign country in which the tax was paid.

    The law changed to allow this. It applies for 2008–09 and later years. Our systems have applied the FITO against the Medicare levy and Medicare levy surcharge in all individual tax returns lodged or amended from July 2012.

    See also:

    How this differs from the previous law

    Previously, your FITO could only be applied against your liability to pay Medicare levy and Medicare levy surcharge if the FITO 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.

    Paying Medicare

    Paying tax in a foreign country does not exempt you from the Medicare levy. However, you can apply any excess FITO against your Medicare liabilities. This may reduce or eliminate the amount of Medicare payable. The excess is the amount remaining after first applying the FITO against your tax payable.

    See also:

      Last modified: 27 Jun 2019QC 25799