Applying a foreign income tax offset against Medicare levy, Medicare levy surcharge and flood levy
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.
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 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.
For 2011–12 only, if you paid foreign tax in a country with which Australia has a tax treaty, you were entitled to a credit as a FITO on the flood levy on your foreign income. Your FITO is first applied against your tax payable, then your Medicare liabilities. Any remaining offset is applied against your flood levy liability.
ATO initiated amendments
We have finished amending assessments. We amended as many 2009 to 2011 individual assessments as possible. We paid interest if you had a refund.
If you were included in our amendment processes, you or your tax agent at that time would have received a letter stating which years we were amending. Amended notices of assessment were sent to the address listed on our system as your postal address.
We were not able to amend assessments if:
- We did not have a valid and current address for you – you can update your address details and ask us to amend.
- Your assessment had already been amended – any excess FITO would have been applied against your Medicare liabilities.
- You claimed a credit for tax paid by the trustee at label 13S on the supplementary section of your tax return. You can ask us to amend. If the trustee assessment is amended, that will affect the amount of the credit to be claimed by the beneficiary for tax paid by the trustee.
- You were listed as a non-resident on our system – non-residents are generally not eligible to claim the FITO.
We did not amended trustee assessments for the 2009 to 2011 years as we could not correctly identify or anticipate the impacts (if any) to individual beneficiary assessments.
You can ask us to amend the trustee assessment, and also the beneficiary assessment if required.
If your assessment was not amended
If your assessment was not amended, you can ask for an amendment. Now we are outside the time limit, you will need to ask for an extension of time to lodge an objection. You will need to tell us why you needed more time.
Information you need to include in your amendment
When requesting an amendment, you must include:
- your full name
- your date of birth
- your contact details
- your tax file number
- year(s) you want to amend
- if applicable, the revised FITO amount at label 20O of the supplement to the tax return – see Do you need to review the FITO amount at label 20O?
- any additional information or documentation showing the correct information.
All amendment requests need signed and dated declarations as outlined below:
- If you are making your own amendment request you must sign and date the request and state the following
- I declare that the information provided, and any attached documents, are true and correct.
- If your tax agent or representative is making the amendment request on your behalf they must sign and date the request and state the following
- I certify this document and any attached documents, have been prepared in accordance with the information supplied by the individual or entity identified in this request and in the attached documents.
- I have received a declaration from the individual or entity identified in this request and in the attached documents, stating that the information provided in each document is true and correct.
- I am authorised by the individual or entity identified in this request and in the attached documents, to submit this request to the Commissioner.
You can send your amendment request by:
- fax to 1300 730 239 with the description 'FITO – Medicare levy'
- mail to
Australian Taxation Office
PO Box 3004
PENRITH NSW 2740
- the Tax Agent Portal – reference 'FITO-Medicare levy'.
Reviewing the FITO amount at label 20O
Before requesting an amendment you should review the FITO amount claimed at label 20O of the supplement to your individual tax return. We have identified situations where this amount is incorrect. We base amendments on this amount so it must be correct.
The two most common situations are when the FITO amount:
- exceeds the sum of the tax payable, Medicare levy and Medicare levy surcharge (and equals the foreign tax paid)
- is exactly equal to the tax payable.
Calculating the FITO amount
If you paid $1,000 or less in foreign tax, your FITO amount will equal the amount of foreign tax paid.
If you paid more than $1,000 in foreign tax, you must work out your FITO limit.
Explains how the foreign income tax offset can be applied against your Medicare and flood levy liabilities and how you can have your assessment amended.