Edited version of private advice

Authorisation Number: 1052476434147

Date of advice: 17 November 2025

Ruling

Subject: Foreign income tax offset

Question

Are you entitled to claim a foreign income tax offset (FITO) for the payments you have paid in Country Z?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20YY

The scheme commenced on:

1 July 20YY

Relevant facts and circumstances

You are a resident of Australia for taxation purposes.

You are currently working in Country Z and earning salary and wages.

You work for Employer Z in Country Z.

You are required to pay a levy in Country Z, and this comes out of your pay.

Relevant legislative provisions

Income Tax Assessment Act 1997 Division 770

Reasons for decision

Foreign income tax offset

The foreign income tax offset (FITO) rules are designed to protect you from the double taxation that may arise where you pay foreign tax on income that is also taxable in Australia. This is achieved by allowing you to claim a tax offset where you have paid foreign tax on amounts included in your assessable income.

The FITO rules are contained in Division 770 of the Income Tax Assessment Act 1997 (ITAA 1997).

The scheme where people in work in Country Z make payments towards benefits. The payments relate to certain benefits which are only payable if you meet the contribution conditions. The contributions also go towards the costs of the health service. The scheme is administered by the relevant authorities in Country Z.

Where a person makes a compulsory contribution to a levy which will be used to provide benefits for that person in the future, that contribution is more akin to a payment for services than a payment of tax. For instance, if a contributor contributes to an unemployment fund and is entitled to unemployment benefits as a result of making those contributions, the contributions have the character of compulsory insurance instead of a tax.

It is possible that some taxpayers may never qualify for benefits under the scheme as they may never become unemployed, incapacitated, attain old age or they may never have a large family. However, if (after satisfying all the relevant conditions) a contributor is entitled to a benefit in return for the contributions, those contributions would be more appropriately regarded as compulsory insurance premiums. They are payments which are made in return for being insured against the happening of a future event. They are not regarded as the payment of tax.

Therefore, the payments are not considered to be a foreign tax paid when working out entitlement to a foreign income tax offset.