Transitional rules allow taxpayers to use certain excess foreign tax credits that existed when the foreign tax offset rules came into effect on 1 July 2008.
At this time, taxpayers with unused excess foreign tax credits belonging to any class of foreign assessable income from the previous five income years can convert these amounts to one bundle of pre-commencement excess foreign income tax for each of those five years subject to the following limits:
- for company taxpayers, excess foreign tax credits in the 'other income' class cannot be converted where they relate to amounts that would be non-assessable non-exempt income if derived in the commencement year
- offshore banking units; existing excess foreign tax credits in the 'offshore banking income' class are converted by multiplying them by the offshore banking eligible fraction (currently one-third).