ATO Interpretative Decision
ATO ID 2001/772
Income Tax
Foreign tax credits - UK tax paid by Australian resident on rental income earned in the UKFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is a foreign tax credit allowable under section 160AF of the Income Tax Assessment Act 1936 (ITAA 1936) for tax paid in the United Kingdom (UK) by an Australian resident taxpayer on rental income earned in the UK?
Decision
Yes. A foreign tax credit is allowable under section 160AF of the ITAA 1936 for tax paid in the UK by an Australian resident on rental income earned in the UK.
Facts
The taxpayer is a resident of Australia for taxation purposes.
The taxpayer owns an investment property in the UK.
The taxpayer earns rental income from the property and will be liable for tax on that rental income in both Australia and the UK.
Reasons for Decision
Subsection 160AF(1) of the ITAA 1936 provides that a taxpayer will be entitled to a foreign tax credit if the following conditions are satisfied:
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- the assessable income of the taxpayer includes foreign income; and
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- the taxpayer has paid foreign tax in respect of that foreign income, being tax for which the taxpayer is personally liable.
The amount of the credit is the lesser of the foreign tax paid or the Australian tax payable in respect of the foreign income.
The Australian resident taxpayer has earned rental income from a property located in the UK on which tax is payable in the UK. The foreign rental income is also assessable in Australia under section 6-5 of the Income Tax Assessment Act 1997. As the conditions contained in subsection 160AF(1) are satisfied, the taxpayer is entitled to a foreign tax credit for the tax paid in the UK. The amount of the credit will be the lesser of the foreign tax paid or the Australian tax payable in respect of the foreign income.
Date of decision: 18 September 2001
Legislative References:
Income Tax Assessment Act 1936
section 160AF
subsection 160AF(1)
section 6-5 Related ATO Interpretative Decisions
ATO ID 2001/719
ATO ID 2001/771
Keywords
Passive foreign income
Rental property income
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 18 September 2001 | Original statement |
| 20 March 2008 | Archived |