| Disclaimer You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
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.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
