ATO Interpretative Decision
ATO ID 2003/291
Income Tax
Foreign Tax Credit: tax imposed by Zimbabwe on pension incomeFOI 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 an Australian resident taxpayer entitled to a foreign tax credit under subsection 160AF(1) of the Income Tax Assessment Act 1936 (ITAA 1936) for Zimbabwean tax imposed on pension income received from Zimbabwe?
Decision
Yes. The taxpayer is entitled to a foreign tax credit under subsection 160AF(1) of the ITAA 1936 as the Zimbabwean tax imposed on the pension income is a creditable foreign tax.
Facts
The taxpayer is a resident of Australia for taxation purposes who receives a pension from Zimbabwe.
The Zimbabwean government imposes income tax on the taxable income of corporate entities and individuals.
Income tax is deducted from the income of an individual by the employer or pension provider. It is calculated on various bands of income at rates fixed by the Zimbabwean government annually.
Reasons for Decision
Subsection 160AF(1) of the ITAA 1936 provides that a resident taxpayer, whose assessable income includes foreign income on which the taxpayer has personally paid foreign tax, is entitled to a credit against the Australian tax payable of the amount of that foreign tax, up to the amount of Australian tax payable on the foreign income.
Subsection 6AB(2) of the ITAA 1936 defines 'foreign tax' to include tax imposed on income by a law of a foreign country.
The Zimbabwean Government imposes income tax on the taxable income of individuals calculated on various bands of income at rates fixed by the government annually. Zimbabwe also has a 'pay-as-you-go' tax system where tax is deducted from the income of the individual by the employer or pension provider. Further, Zimbabwe comes under 'limited-exemption listed countries' which are considered to have tax systems similar to Australia's.
Zimbabwe tax imposed on income is therefore a 'foreign tax' for the purposes of subsection 6AB(2) of the ITAA 1936.
Accordingly, a foreign tax credit will be allowable to the taxpayer under subsection 160AF(1) of the ITAA 1936 for Zimbabwean tax imposed on the pension income.
Date of decision: 10 December 2002Year of income: Year ended 30 June 2002
Legislative References:
Income Tax Assessment Act 1936
subsection 6AB(2)
subsection 160AF(1)
Keywords
Foreign Tax Credits
Foreign Income
Foreign Pension income
Creditable Foreign Taxes
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 10 December 2002 | Original statement |
| 14 November 2008 | Archived |