Private ruling: Reporting of foreign income
Date of advice: 1 August 2025
Published: 29 September 2025
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner allow you to return your foreign sourced income on a foreign country's income year basis on your Australian income tax return for the relevant income years? | A1: Yes.

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 Z 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 finalise as a result of regulatory and reporting requirements imposed by the Country Z authorities. Your Country Z tax accountants need time to collate and report information in relation to the year end. Once they are finalised, they are then provided to your Australian tax agents. The need to disclose your Country Z income on an Australian year end basis considerably lengthens the time required to prepare your Australian tax return as this involves: • Dissecting Country Z income from the foreign year ended from the prior year to determine the income that relates to the relevant period. This can involve an arbitrary allocation and may not always reflect the true pattern in which you derive your assessable income once adjusted for an Australian year end. • Allocating Country Z tax paid between financial years 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. This is further complicated by the legislative requirement in section 770-10 of the Income Tax Assessment Act 1997 , to only claim a FITO when tax has been paid in the foreign jurisdiction. You derive the majority of your income from Country Z. The Country Z income consists of Country Z investment income from foreign trusts and companies.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 770-10

Reasons for decision: Summary: The general rule is that for income tax purposes an individual taxpayer will be required to disclose in his or her Australian tax return the amount of foreign income derived during the Australian financial year. It has been recognised in the past that where an individual taxpayer's foreign source accounts have been prepared on a basis other than the year ended 30 June, difficulty can be experienced in dissecting the income for the purposes of returning on a strict Australian income year basis. The Commissioner has issued 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 which addresses the issue of foreign income and expenses to be returned for an Australian year of income where foreign accounts and/or tax apply on a different basis. Specifically, paragraph 39 of IT 2498 states: ... individual taxpayers who are required to prepare foreign source income accounts on a basis other than a year ending 30 June and who can demonstrate difficulties in dissecting the income/expenses for the purposes of returning on a strict Australian income year basis in relation to a year of income, may be permitted to return the foreign source income in his or her Australian return for that year of income on the relevant foreign income year basis. ... You are in receipt of overseas foreign source income. The income year for the overseas country does not align with the Australia income year. As a result of regulatory and reporting requirements imposed by the relevant foreign tax authorities you face significant difficulty in obtaining information in relation to the foreign income within a suitable timeframe to include in your Australian tax return by your lodgement due date. 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 the overseas 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.