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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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: 1012626287974

Ruling

Subject: Foreign income tax offset

Question and answer

Are you entitled to a foreign income tax offset for the charges imposed on Country Y income?

Yes.

This ruling applies for the following periods

Year ending 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

The scheme commences on

1 July 2012

Relevant facts and circumstances

You are a resident of Australia for taxation purposes.

You own a rental property in country Y.

You lodge a Country Y tax return each year.

Two of the charges are specifically mentioned in the Country Y Double Tax Agreement and three are not.

These charges are applied on certain income, as well as on capital gains.

These charges are collected through the Country Y tax return and are added to the already calculated tax payable.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 770-10

Income Tax Assessment Act 1997 Section 770-15

International Tax Agreements Act 1953 Section 5

Reasons for decision

You are entitled to a foreign income tax offset for foreign income tax paid (subject to limitations) on an amount that is included in your assessable income. Foreign income tax includes a tax that is subject to an agreement under the International Tax Agreements Act 1953 (Agreements Act).

In determining the availability of a foreign income tax offset it is necessary to consider not only the income tax laws but also any applicable tax treaties contained in the Agreements Act.

Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The Country Y Agreement is listed in section 5 of the Agreements Act.

The Country Y agreement operates to avoid the double taxation of income received by residents of Australia and country Y. Article X (1) of the country y Agreement states the existing taxes to which the Agreement shall apply. Country y taxes that are specifically identified within the Country y Agreement include:

    • income tax

    • widespread social security contributions and

    • contributions for the reimbursement of the social debt.

The charges are not specifically identified within the French Agreement as taxes to which the Agreement applies. However, Article X (2) of the Country y Agreement states, 'This Convention shall also apply to any identical or substantially similar taxes which are subsequently imposed by a Contracting State in addition to, or in place of the existing taxes to which this Convention applies.'

The 'social charges' listed above are considered to be 'substantially similar' to the country Y 'income tax' and the 'social security contributions' identified within Article X (1)(b) of the French Agreement. Therefore, you can take these social charges into account when determining your entitlement to a Foreign Income Tax Offset.