Edited version of private advice

Authorisation Number: 1052249489969

Date of advice: 8 May 2024

Ruling

Subject: Assessable income - foreign income

Question

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

Answer

Yes.

The general rule is that for income tax purposes an individual taxpayer will be required to disclose in his or her Australian tax return the amount of foreign income derived during the Australian financial year.

It has been recognised in the past that where an individual taxpayer's foreign source accounts have been prepared on a basis other than the year ended 30 June, difficulty can be experienced in dissecting the income for the purposes of returning on a strict Australian income year basis.

The Commissioner has issued Taxation Ruling IT 2498 Income Tax: foreign tax credit system: currency translation of foreign income: trading stock and depreciable plant: basis of returning foreign income: capital gains/losses (IT 2498) which addresses the issue of foreign income and expenses to be returned for an Australian year of income where foreign accounts and/or tax apply on a different basis.

Specifically, paragraph 39 of IT 2498 states:

... individual taxpayers who are required to prepare foreign source income accounts on a basis other than a year ending 30 June and who can demonstrate difficulties in dissecting the income/expenses for the purposes of returning on a strict Australian income year basis in relation to a year of income, may be permitted to return the foreign source income in his or her Australian return for that year of income on the relevant foreign income year basis. ...

You are in receipt of Country Z foreign source income.

The income year for Country Z does not align with the Australian income year. As a result of regulatory and reporting requirements imposed by the relevant foreign tax authorities you face significant difficulty in obtaining information in relation to the foreign income within a suitable timeframe to include in your Australian tax return by your lodgement due date.

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

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 2023

Year ending 30 June 2024

Year ending 30 June 2025

Year ending 30 June 2026

Year ending 30 June 2027

Year ending 30 June 2028

The scheme commenced on:

1 July 2022

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.

The income includes income from Country Z trusts and companies.

These payments represent the majority of your total foreign income.

Your foreign advisors then need time to collate and report that information to your Australian tax agents who then need time to convert that information to Australian dollars and contemplate the relevant Australian tax implications.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 4-10