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INCOME TAX ASSESSMENT ACT 1997 - SECT 770.75

Foreign income tax offset limit

  (1)   There is a limit (the offset limit ) on the amount of your * tax offset for a year. If your tax offset exceeds the offset limit, reduce the offset by the amount of the excess.

  (2)   Your offset limit is the greater of:

  (a)   $1,000; and

  (b)   this amount:

  (i)   the amount of income tax payable by you for the income year; less

  (ii)   the amount of income tax that would be payable by you for the income year if the assumptions in subsection   (4) were made.

Note 1:   If you do not intend to claim a foreign income tax offset of more than $1,000 for the year, you do not need to work out the amount under paragraph   (b).

Note 2:   The amount of the offset limit might be increased under section   770 - 80.

  (3)   For the purposes of paragraph   (2)(b), work out the amount of income tax payable by you, or that would be payable by you, disregarding any * tax offsets.

  (4)   Assume that:

  (a)   your assessable income did not include:

  (i)   so much of any amount included in your assessable income as represents an amount in respect of which you paid * foreign income tax that counts towards the * tax offset for the year; and

  (ii)   any other amounts of * ordinary income or * statutory income from a source other than an * Australian source; and

  (b)   you were not entitled to any deductions that:

  (i)   are * debt deductions that are attributable to an * overseas permanent establishment of yours; or

  (ii)   are deductions (other than debt deductions) that are reasonably related to amounts covered by paragraph   (a) for that year.

Note:   You must also assume you were not entitled to any deductions for certain converted foreign losses: see section   770 - 35 of the Income Tax (Transitional Provisions) Act 1997 .

Example:   If an entity has paid foreign income tax on a capital gain that comprises part of its net capital gain, only that capital gain on which foreign income tax has been paid is disregarded.


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