Edited version of private advice

Authorisation Number: 1051970039594

Date of advice: 7 April 2022

Ruling

Subject: Substituted accounting period

Question

Will the Commissioner allow you to return your foreign sourced income on a Country Z income year basis on your Australian income tax return?

Answer

Yes.

From the information provided, the Commissioner accepts that your circumstances fall within those outlined in Taxation Ruling IT 2498 and will allow you to return the foreign sourced income on Country Z income year basis on your Australian tax return.

Australian source income, and other foreign income (such as dividends or interest) that is subject to a final withholding tax and can be readily returned on an Australian income year basis, would continue to be shown in the taxpayer's return on the basis of the Australian income year.

If the difficulties which have warranted you being allowed to return foreign income on the foreign income year basis cease to exist, you will be required to return the foreign sourced income on the Australian year of income basis.

This ruling applies for the following periods:

Year ended 30 June 2021

Year ending 30 June 2022

Year ending 30 June 2023

Year ending 30 June 2024

Year ending 30 June 2025

Year ending 30 June 2026

The scheme commences on:

1 July 2020

Relevant facts and circumstances

You are a resident of Australia for taxation purposes.

Your tax returns are prepared by a tax agent.

Your tax agent has difficulty obtaining information relating to your Country Z foreign income in a timely manner in order to prepare your Australian tax returns by your due date. This is due to the information not being available to finalize as a result of regulatory and reporting requirements imposed by the relevant foreign authorities.

Your Country Z tax accountants need time to collate and report information in relation to an alternative financial year end.

Due to lodgement extensions provided in the Country Z, the Country Z tax returns may not be finalised for months following the relevant date.

Once they are finalised, they are then provided to your Australian tax agents, who then need time to convert that information to Australian dollars, contemplate the relevant Australian tax implications and apply an arbitrary allocation of the foreign income and foreign tax paid over the year.

You derive the majority of your combined income with your spouse from a foreign source.

This income comprises the following:

•                    Business income

•                    Salary and wages

•                    Interest

•                    Dividends

•                    Distributions

•                    Capital gains

You lodge a joint tax return in Country Z with your spouse.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5