Private ruling: Adoption of foreign income year basis for returning foreign income
Date of advice: 18 November 2022
Published: 16 January 2023
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner allow you to return your Country Y foreign sourced income on an income year basis on your Australian income tax return? | A1: Yes. 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 a country Y income year basis on your Australian tax return. Australian source income, and other foreign income (such as dividends or interest) that is subject to a final withholding tax and can be readily returned on an Australian income year basis, would continue to be shown in the taxpayer's return on the basis of the Australian income year. 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.

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 Y 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. Your Country Y tax accountants need time to collate and report information in relation to their year end. You derive XX% of your income from a foreign source. This income comprises the following: Your Australian tax advisors have significant difficulty in obtaining information in relation to your Country Y income for the full year ended 30 June from your Country Y tax accountants in a timely manner, particularly income relating to the latter part of the Australian income year. This is due to the information not being available in the required timeframes as a result of regulatory and reporting requirements imposed by country Y authorities. Your Country Y tax accountants require time to collate and report information in relation to their year end. Due to lodgement extensions provided in Country Y, the Country Y tax returns may not be finalised for months following the end of the foreign income year. Once they are finalised, they are then provided to your Australian tax agent, who then require time to convert the information provided to Australian dollars, contemplate the relevant Australian tax implications and apply an arbitrary allocation of the foreign income and foreign tax paid over the year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5


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