ATO Interpretative Decision

ATO ID 2009/105 (Withdrawn)

Income Tax

Foreign Income Tax Offset: tax paid on pension and rental income earned in New Caledonia
FOI status: may be released
  • This ATO ID is withdrawn as it is a simple statement of the law and some of the statements in the reasons for decision are no longer accurate.
    This document has changed over time. View its history.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is an Australian resident taxpayer entitled to a foreign income tax offset under subsection 770-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997) for New Caledonian tax paid in relation to pension and rental income received from New Caledonia?

Decision

Yes. An Australian resident taxpayer is entitled to a foreign income tax offset under subsection 770-10(1) of the ITAA 1997 for New Caledonian tax paid in relation to pension and rental income received from New Caledonia.

Facts

The taxpayer is a resident of Australia for income tax purposes.

The taxpayer received pension income from New Caledonia.

The taxpayer received rental income from a property in New Caledonia.

The law of New Caledonia provides for the imposition of income tax on pension and rental income derived in New Caledonia.

The taxpayer has paid income tax in New Caledonia in relation to that income.

Reasons for Decision

Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

Pension income and rental income is ordinary income for the purposes of section 6-5 of the ITAA 1997.

In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Taxation Assessment Act 1936 and the ITAA 1997 so that those Acts are read as one.

Australia does not have a tax treaty with New Caledonia. However, as New Caledonia is an overseas territory of France, the French Agreement may apply.

Schedule 11 to the Agreements Act contains the tax treaty between Australia and France (the 2006 French Convention) which came into force on 1 June 2009. The 2006 French Convention operates to avoid double taxation of income received by Australian and French residents.

Taxation Determination TD 93/220 addresses whether the definition of 'France' in Article 2(1)(b) of the former 1976 French Agreement and French Protocol includes the overseas French Territories. TD 93/220 determines that these territories are not part of France for the purposes of the French Agreement. Therefore the former 1976 French Agreement does not apply. The definition of 'France' in Article 3(1)(b) of the new 2006 French Convention is substantially the same as in the former French Agreement, and thus it also does not apply.

Subsection 770-10(1) of the ITAA 1997 provides that where the assessable income of a resident contains foreign income and foreign income tax has been paid on that income, a tax offset will be allowed. The tax offset has the effect of reducing the Australian tax that would otherwise be payable on the double-taxed amount. The amount of the foreign income tax offset is subject to the foreign income tax offset limit calculated in accordance with section 770-75.

As the taxpayer is a resident of Australia, the New Caledonia pension and rental income forms part of their assessable income under subsection 6-5(2) of the ITAA 1997. The law of New Caledonia provides for the imposition of income tax on pension and rental income derived from New Caledonia. The taxpayer has paid income tax in New Caledonia in relation to that income.

Therefore a foreign income tax offset will be allowed under subsection 770-10(1) of the ITAA 1997.

Date of decision:  2 September 2009

Year of income:  Year ended 30 June 2009 Year ended 30 June 2010 Year ended 30 June 2011

Legislative References:
Income Tax Assessment Act 1997
   subsection 6-5(2)
   subsection 770-10(1)
   subsection 770-75

International Tax Agreements Act 1953
   section 4
   Schedule 11

Related Public Rulings (including Determinations)
Taxation Determination TD 93/220

Keywords
Double tax agreements
Foreign income
International tax
New Caledonia

Business Line:  International Centre of Expertise

Date of publication:  18 September 2009

ISSN: 1445-2782

history
  Date: Version:
  2 September 2009 Original statement
You are here 19 February 2010 Archived