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Chapter 1: Introduction

Last updated 3 February 2010



The foreign tax credit system begins.


The foreign source income measures relating to controlled foreign companies (CFCs) and transferor trusts are set up.


The FIF measures, introduced by the Income Tax Assessment Amendment (Foreign Investment) Act 1992, begin operation.


The foreign income tax offset rules, introduced by the Tax Laws Amendment (2007 Measures No. 4) Act 2007, replace the foreign tax credit rules and apply to taxpayers for income years beginning on or after 1 July 2008.

Since the foreign tax credit system was introduced in 1987–88, most foreign income derived by Australian residents has been taxed in Australia, with a credit for foreign tax paid. The new foreign income tax offset rules allow taxpayers to claim relief, in the form of a non-refundable tax offset, for foreign income tax paid in respect of an amount included in their assessable income.

The foreign source income measures introduced in 1990–91 aim to tax substantial investments or involvement by Australians in foreign companies and foreign trusts able to shelter low-taxed income.

The FIF measures introduced in 1993 reduce the extent to which Australian residents can defer Australian tax where they hold interests in foreign entities.

The FIF measures apply to income and gains accumulating in foreign companies that are not controlled by Australians or foreign trusts that fall outside the scope of the foreign source income measures.

The FIF measures also apply when working out the income of CFCs and controlled foreign trusts (CFTs), and to certain FLPs that have an investment component (such as life bonds).