ATO Interpretative Decision
ATO ID 2004/941 (Withdrawn)
Income tax
Assessable foreign income - Australian source loss - whether election to offset tax losses against assessable foreign income appliesFOI status: may be released
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This ATO ID is withdrawn because section 79DA of the Income Tax Assessment Act 1936 does not apply for income years commencing on or after 1 July 2008. Despite its withdrawal, this ATO ID continues to be a precedential view in respect of decisions for income years up to, and including, the 2007/2008 income year.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Withdrawn 12 December 2008
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
If an Australian resident company derives assessable foreign income and also makes a loss in the same income year from carrying on a business that has an Australian source, does section 79DA of the Income Tax Assessment Act 1936 (ITAA 1936) apply in respect of that loss?
Decision
No. Section 79DA of the ITAA 1936 applies only in respect of tax losses within section 36-10 of the ITAA 1997 that may be deducted in a later income year.
Facts
Company is a resident of Australia under subsection 6(1) of the ITAA 1936 at all relevant times.
Company derives assessable foreign income within subsection 160AFD(9) of the ITAA 1936 in the 2004-05 income year. No foreign income deductions are allowable from this assessable foreign income. Company satisfies the conditions of Division 18 of Part III of the ITAA 1936 and is therefore entitled to a foreign tax credit under subsection 160AF(1) of the ITAA 1936 for this foreign income.
In the 2004-05 income year Company also carries on a business that has an Australian source. Deductions incurred in carrying on this business exceed assessable income derived.
Company has no carried forward tax losses from earlier income years.
Company derives no other assessable income in the 2004-05 income year.
Reasons for Decision
Subsection 79DA(1) of the ITAA 1936 provides that:
A tax loss is not allowable as a deduction from a taxpayer's assessable foreign income (as defined in section 160AFD) of the year of income, except so far as the taxpayer so elects.
Section 36-10 of the ITAA 1997 states how a tax loss for an income year is to be calculated.
Section 36-17 of the ITAA 1997 provides that a tax loss of a corporate tax entity may only be deducted in a later income year.
Section 79DA of the ITAA 1936 cannot apply to Company for the 2004-05 income year as Company does not have any tax losses within section 36-10 of the ITAA 1997 from earlier income years.
Date of decision: 17 November 2004Year of income: Year ended 30 June 2005
Legislative References:
Income Tax Assessment Act 1997
section 36-10
section 36-17
subsection 6(1)
section 79DA
subsection 79DA(1)
Division 18 of Part III
subsection 160AF(1)
subsection 160AFD(9)
Keywords
Carry forward losses
Foreign income
Foreign tax credits
Tax loss
ISSN: 1445-2782
| Date: | Version: | |
| 17 November 2004 | Original statement | |
| You are here → | 12 December 2008 | Archived |