INCOME TAX ASSESSMENT ACT 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 770 - Foreign income tax offsets  

Subdivision 770-A - Entitlement rules for foreign income tax offsets  

Basic entitlement rule for foreign income tax offset

SECTION 770-10   Entitlement to foreign income tax offset  

770-10(1)  
You are entitled to a *tax offset for an income year for *foreign income tax. An amount of foreign income tax counts towards the tax offset for the year if you paid it in respect of an amount that is all or part of an amount included in your assessable income for the year.

Note 1:

The offset is for the income year in which your assessable income included an amount in respect of which you paid foreign income tax - even if you paid the foreign income tax in another income year.

Note 2:

If the foreign income tax has been paid on an amount that is part non-assessable non-exempt income and part assessable income for you for the income year, only a proportionate share of the foreign income tax (the share that corresponds to the part that is assessable income) will count towards the tax offset (excluding the operation of subsection (2)).

Note 3:

For offshore banking units, the amount of foreign income tax paid in respect of offshore banking income is reduced: see subsection 121EG(3A) of the Income Tax Assessment Act 1936 .

Taxes paid on section 23AI or 23AK amounts

770-10(2)  
An amount of *foreign income tax counts towards the *tax offset for you for the year if you paid it in respect of an amount that is your *non-assessable non-exempt income under either section 23AI or 23AK of the Income Tax Assessment Act 1936 for the year.

Note 1:

Sections 23AI and 23AK of the Income Tax Assessment Act 1936 provide that amounts paid out of income previously attributed from a controlled foreign company or a foreign investment fund are non-assessable non-exempt income.

Note 2:

Foreign income taxes covered by this subsection are direct taxes (for example, a withholding tax on a dividend payment) and not underlying taxes, only some of which are covered by section 770-135 .

Exception for certain residence-based foreign income taxes

770-10(3)  
An amount of *foreign income tax you paid does not count towards the *tax offset for the year if you paid it:


(a) to a foreign country because you are a resident of that country for the purposes of a law relating to the foreign income tax; and


(b) in respect of an amount derived from a source outside that country. Exception for previously complying funds and previously foreign funds

770-10(4)  
An amount of *foreign income tax paid by a *superannuation provider in relation to a *superannuation fund does not count towards the *tax offset for the year if:


(a) the tax was paid in respect of an amount included in the fund ' s assessable income under table item 2 or 3 in section 295-320 ; and


(b) the provider paid the tax before the start of the income year.

Note:

Table items 2 and 3 in section 295-320 include additional amounts in the assessable income of superannuation funds that change their status from complying to non-complying or from foreign to Australian.

Exception for credit absorption tax and unitary tax

770-10(5)  
An amount of *credit absorption tax or *unitary tax you paid does not count towards the *tax offset for the year.


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