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  • Foreign tax credit


    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    The foreign tax credit is the credit you can claim on the amount included in your assessable income for the distribution made by the non-resident trust.

    Example 6: Unlisted country trust estate

    During the 2003–04 income year, a resident individual received a distribution of $10,000 from an unlisted country trust estate. The entire amount was included in the taxpayer's assessable income under section 99B. The distribution was paid from $20,000 foreign income derived by the trust in the 1998-99 income year. The income was not subject to tax in a listed country and the trust paid foreign tax of $5,000.

    Interest is payable on the distributed amount of $10,000 grossed up by the amount of foreign tax relating to the distributed amount – $3,333 – multiplied by the applicable rate of tax – 47% – less the amount of foreign tax credit.

    ($13,333 × 47%) − $3,333 = $2,934

    Note: The foreign tax credit is worked out by allocating, on a pro rata basis, the foreign tax paid by the trust estate on its foreign income. The profits and income of the trust estate that were available for distribution were:

    $20,000 − $5,000


    Amount of the distribution


    Foreign tax attributable to the distribution
    ($10,000 × $5,000) ÷ 15,000



    End of example
    Last modified: 05 Dec 2006QC 18000