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Edited version of your written advice
Authorisation Number: 1012826849854
Date of advice: 19 June 2015
Ruling
Subject: Foreign income estimate
Question and answer
Can you estimate your foreign sourced assessable income as an interim pending the receipt of financial statements?
Yes.
This ruling applies for the following periods:
Year ended 30 June 2014
The scheme commenced on:
1 July 2013
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You are a resident of Australia for taxation purposes.
You have business interests overseas from which you derive profits.
You have difficulties in obtaining the relevant financial statements in order to lodge your Australian tax returns.
You and your spouse's income overseas is not derived on an equal basis.
You lodge your returns overseas as a family return declaring your income 50-50 and paying any tax on a 50-50 basis.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 161.
Reasons for decision
Section 161 of the Income Tax Assessment Act 1936 (ITAA 1936 sets out the requirements in relation to lodging an annual tax return.
Under section 161(1) the commissioner requires everyone to lodge a return for a year of income within a specified period.
The commissioner is able to defer the time for the giving of the return under Section 388-55 in schedule 1 to the Taxation administration Act 1953.
The Commissioner accepts under the self-assessment provisions to allow you to estimate your overseas income for the purposes of lodging your Australian tax return.
You are required to amend your assessments if the estimations prove inaccurate.
It is important to note that you may incur shortfall penalty and or shortfall interest charges on any subsequent amendments and any Foreign Income Tax Offset (FITO) you intend on claiming in relation to the overseas tax cannot be claimed until this is actually paid.
Your lodgement of a joint overseas tax return does not determine which of you derived the income under Australian tax law.
You need to declare in your Australian tax return the income you each derived in relation to your business profits overseas. The 50:50 approach followed overseas is not acceptable for your Australian tax return.
The claim for FITO should involve an apportionment of the overseas tax paid based on the split of relevant overseas income derived for Australian tax purposes rather than a default 50:50 split.