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Edited version of your private ruling
Authorisation Number: 1012569657927
Ruling
Subject: Foreign income tax offset (FITO)
Question 1
Are you entitled to claim for a foreign income tax offset (FITO) for the "hypo tax" withheld by your employer?
Answer
No
This ruling applies for the following period:
Year ending 30 June 2014
The scheme commences on
1 July 2013
Relevant facts and circumstances
You will go to Country A on a project run out of Country B Office of your current Australian employer.
You gross income will be x-y % above your net income.
Hypo -tax will be withheld by your employer.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 770-10.
Income Tax Assessment Act 1997 Subsection 770-15(1).
Reasons for decision
Foreign Income Tax offset (FITO)
Section 770-10 of the ITAA 1997 is the primary provision under which a foreign income tax offset arises. FITO can be claimed for foreign income tax paid by a taxpayer in respect of an amount that is included in their assessable income.
Foreign income tax is a tax imposed by a law other than an Australian law, on income, profits or gains (subsection 770-15(1) of the ITAA 1997). The taxpayer must have paid the foreign income tax before an offset is available. A taxpayer is deemed to have paid the foreign income tax if the foreign income tax has been withheld from the income at its source.
The amount withheld by your employer is not a tax imposed by a foreign country. Therefore there is no offset available. The offset is only available for foreign tax actually paid.