Edited version of private advice

Authorisation Number: 1052373252314

Date of advice: 18 March 2025

Ruling

Subject:Foreign income tax offset

Question 1

Are you eligible to claim a foreign income tax offset (FITO) under Division 770 of the Income Tax Assessment Act 1997 (ITAA 1997) for the Country A capital gains tax (CGT) you paid in relation to the property to the extent the Country A capital gain is included in your income for Australian tax purposes?

Answer 1

Yes.

You have paid foreign income tax on CGT included in your assessable income in Country A and, if not for Division 770 of the ITAA 1997, you would pay Australian income tax on the same income. You are entitled to a FITO for the foreign tax paid in respect of the amount of CGT that is included in the Australian assessable income in the relevant year.

Question 2

Are you eligible to claim a FITO under Division 770 of the ITAA 1997 for the Country A income tax paid in relation to the property to the extent the Country A rental income is included in your assessable income for Australian tax purposes.

Answer 2

Yes.

You have paid foreign income tax on Country A rental income included in your assessable income in Country A and, if not for Division 770 of the ITAA 1997, you would pay Australian income tax on the same income. You are entitled to a FITO for the foreign tax paid in respect of the amount of Country A rental income that is included in the Australian assessable income in the relevant year.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

XX XXXX 20XX

Relevant facts and circumstances

Prior to XX XXXX 20XX, you purchased the property in Australia (the property).

The property was used as your main residence until you relocated to Country A.

On or around XX XXXX 20XX, you relocated to Country A.

For the period you lived in Country A, you were:

•                     A Country A tax resident.

•                     Foreign residents of Australia for tax purposes.

On XX XXXX 20XX, you permanently moved back to Australia.

Under Country A tax law, as part of your departure from Country A, you:

•                     were deemed to have disposed of the property (and certain other assets) at its fair market value as at the date you ceased to be tax residents of Country A;

•                     made a capital gain on the deemed disposal of the property of approx. representing the Country A capital gain; and

•                     paid Country A tax on the capital gain arising on the deemed disposal of the property (Country A CGT).

Further, as part of your departure from Country A, you also paid Country A income tax on rental income from the property (Country A rental income).

Country A tax is not levied on an asset-by-asset basis and is paid on overall income earned by you. The amounts included in the facts are estimated by you to be XX% of the total Country A tax paid by you on the basis that XX% of the total gross Country A capital gain made by you is attributable to the property.

On XX XXXX 20XX, you entered a contract to sell the property.

On XX XXXX 20XX, the property settled.

On or around XX XXXX 20XX, you paid the Country A CGT and Country A income tax to the Country A tax office.

A portion of the Country A rental income on which the Country A income tax was paid was included in your assessable income for Australian tax purposes for the 20XX income year.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 Division 770