The allowance of credits on distribution is similar to the credits under the existing foreign tax credit system.
Broadly, this means that, if the amount of the distribution is included in assessable income, both companies and other taxpayers are allowed a credit for foreign taxes paid:
- directly by the taxpayer - for example, a withholding tax on a dividend, and
- by the trustee of the trust - including accruals-type taxes in respect of lower tier entities.
In addition to the normal operation of the foreign tax credit system, you are allowed a credit where the trust distribution is exempt because it has been subject to attribution of FIF income in a previous year. This is limited to the amount not already allowed as a credit at the time of attribution when the calculation method was used. [section 160AFCJ]