Edited version of private advice

Authorisation Number: 1052413659499

Date of advice: 27 June 2025

Ruling

Subject: Foreign income

Question 1

Will the Commissioner allow you to return your relevant foreign sourced income on a foreign income year basis in your 20YY, 20YY, 20YY, 20YY, 20YY and 20YY Australian income tax returns?

Answer 1

Yes.For income tax purposes, an individual taxpayer will usually be required to include amounts of foreign income derived during the Australian income year on their Australian income tax return.

Where an individual's foreign source accounts are prepared on a basis other than an income year ending on 30 June, it is recognised that there can be difficulties in dissecting income for the purposes of returning income on a strict Australian income year basis.

In line with the principles discussed in 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, the Commissioner accepts that you have demonstrated difficulties in obtaining information in relation to your foreign sourced income within a suitable timeframe to include on your Australian tax return by your lodgement due date.

Therefore, you will be allowed to return the foreign sourced income on a Country A year basis on your Australian tax return.

If the difficulties which have warranted you being allowed to return foreign sourced 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 20YY

Year ended 30 June 20YY

Year ended 30 June 20YY

Year ended 30 June 20YY

Year ended 30 June 20YY

Year ended 30 June 20YY

The scheme commenced on:

DD MM 20YY

Relevant facts and circumstances

You are an Australian resident for tax purposes.

Your Australian income tax return is lodged by your tax agent.

A significant portion of your taxable income consists of Country A investment income from foreign trusts and companies.

The Country A income makes up the majority (in excess of XX%) of your overall Australian taxable income.

You are required to lodge an annual tax return in Country A.

The Country A income year does not align with the Australian income year,

You need to have access to your Country A income tax returns before you can prepare your Australian income tax returns. This is so that you can obtain the correct income share of Country A income.

You have difficulty lodging your Australian tax returns in the required timeframe because:

•                You are required to dissect your Country A income from the year ended 31 December from the prior year to determine the income that relates to the period 1 July to 31 December. This involves an arbitrary allocation and may not always reflect the true pattern in which you derived your assessable income once adjusted for a 30 June year end.

•                You are required to wait for your Country A tax accountants to complete your Country A tax return for the year ended 31 December of the current year with regard to the Country A income for the period 1 January to 30 June. This information is usually not available before the due date of the Australian income tax return.

•                Allocating Country A tax paid between financial years in order to calculate the correct Foreign Income Tax Offset (FITO). The current approach involves assuming that tax is paid evenly throughout the year, and then allocating tax paid over the Australian income tax year.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5