Private ruling: Foreign income tax offset
Date of advice: 22 September 2025
Published: 10 November 2025
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: For the purposes of section 276-205 of the Income Tax Assessment Act (ITAA 1997), is the taxpayer's determined member component, of a character relating to foreign income tax offset applicable to discountable capital gains, equal to the amount disclosed in Note 1 of their Attribution Managed Investment Trust Member Statement, for the year ended 30 June 20XX? | A1: Yes. | Q2: Pursuant to subsection 770-10(1) of the ITAA 1997, is the taxpayer entitled to a foreign income tax offset, in respect of discountable capital gains attributed to it, equivalent to two-thirds of its determined member component, of a character relating to foreign income tax offset applicable to discountable capital gains, for the year ended 30 June 20XX? | A2: Yes.

Relevant facts and circumstances: The taxpayer 1. The taxpayer is a complying superannuation entity as defined in section 995-1. The Trust 2. The Trust is an Australian resident unit trust, that was treated as a managed investment trust (MIT) from 1 July 20XX and elected into the attribution management investments trust (AMIT) regime from 1 July 20XX. 3. The Trust has made the MIT capital account election under Division 275. 4. The Trust operates solely in the business of investment management within Australia, however, it has global investment exposure. 5. The Trust owns investments in foreign listed equities, including shares in listed companies in Country A. These investments are held on capital account. 6. During the year ended 30 June 20XX, the Trust disposed of some listed equities in County A and as a result of these disposals, the Trust made capital losses, capital gains on those equities held for less than 12 months (short capital gains) and capital gains on those equities held for at least 12 months (long capital gains). 7. For the year ended 30 June 20XX, the Trust applied current year capital losses first to short capital gains and then to long capital gains. As a result, the Trust's short capital gains were reduced to nil. 8. The Trust's remaining current year capital losses reduced a portion of its long capital gains and the Trust made a net capital gain of $X (after applying capital losses and the 50% capital gains tax discount) for the year ended 30 June 20XX. 9. During the year ended 30 June 20XX, the Trust paid the following amounts of foreign taxes: (a) $X foreign taxes in relation to foreign income (b) $X foreign taxes in relation to short capital gains (c) $X foreign taxes in relation to long capital gains 10. The foreign taxes in relation to short and long capital gains all relate to income tax paid in Country A in relation to the disposal of the shares listed in Country A. The Custodian 11. The Custodian is in the business of providing master custody and related services, including tax reporting, pursuant to an Australian financial services licence. It is a custodian as defined in section 995-1. 12. The Custodian holds the legal title to the units in the Trust as custodian for the taxpayer. Attribution managed investment trust member annual (AMMA) statement 13. The Trust's 20XX AMMA statement, that was issued to the taxpayer, disclosed the following amounts attributable to the taxpayer: (a) Net Income (excluding capital gains) $X (b) Discounted Capital Gains - Taxable $X (c) Discounted Capital Gains - Non-Taxable $X (d) Foreign income tax offset - Capital ($X) Note 1 (e) Foreign Income tax offset - Other income ($X) 14. Note 1 of the 20XX AMMA statement includes the following additional information in respect of the amount reported as 'Foreign income tax offset - Capital': The Trust paid $X foreign tax on share disposal generating gross long capital gains, which after applying residual capital losses, reduced the foreign income tax offset attributable to long capital gains to $X and that 50% of this is $X.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 276-80 | Income Tax Assessment Act 1997 section 276-85 | Income Tax Assessment Act 1997 section 276-115 | Income Tax Assessment Act 1997 section 276-205 | Income Tax Assessment Act 1997 subsection 276-460(2) | Income Tax Assessment Act 1997 section 770-10(1) | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Summary: The taxpayer's determined member component, of a character relating to foreign income tax offset applicable to discountable capital gains, is equal to the amount disclosed in Note 1 of their Attribution Managed Investment Trust Member Statement for the year ended 30 June 20XX for the purposes of section 276-205 of the ITAA 1997. | Detailed Reasoning - Determined member component: 1. Subsection 276-205(1) provides that the determined member component of a particular character for an income year of a member of an AMIT in respect of the income year is the amount of the member's member component of that character as reflected in the AMIT's latest AMMA statement for the member for the income year. | Detailed Reasoning - Custodian interposed between AMIT and member: 2. If there is a custodian interposed between an AMIT and a member, section 276-115 treats the member as being the member of the AMIT for the purposes of Subdivision 276-C. 3. Subsection 276-115(1) states that section 276-115 applies if: (a) a trust that is a *custodian is a *member of an *AMIT in respect of an income year; and (b) the custodian has, for the income year, a *determined member component of a particular character for the AMIT; and (c) the custodian is interposed between the AMIT and another entity (the subsequent recipient); and (d) the subsequent recipient: (i) starts to have, at a time in the income year, an entitlement to an amount that is reasonably attributable to all or part of the determined member component; or (ii) would start to have, at a time in the income year, such an entitlement if the determined member component were an actual payment of an amount. 4. Subsection 276-115(3) states that for the purposes of this Subdivision: (a) treat the subsequent recipient as being a *member of the *AMIT in respect of the income year; and (b) treat the subsequent recipient as having, for the income year, a *determined member component for the AMIT that: (i) is of the character mentioned in paragraph (1)(b); and (ii) is equal to the amount of the entitlement mentioned in subparagraph (1)(d)(i) or (ii). | Detailed Reasoning - AMMA statement: 5. Paragraph 276-460(2)(a) requires the AMMA statement to include information that reflects the amount and character of each member component of the member for the income year. 6. The role of the AMMA statement is explained in the Explanatory Memorandum to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Bill 2015 (EM) as follows: 3.61 The AMMA statement that is given to an entity that is a member of an attribution MIT in respect of an income year sets out the member's determined member components for that income year. The objective of the AMMA statement is to ensure that the information provided by the trustee of an attribution MIT to a member is sufficient for that member to complete their income tax return. 7. Therefore, it is reasonable to expect that members will rely on the information contained in the AMMA statement, which the EM confirms as follows: 7.15 A taxpayer is responsible for ensuring that the taxable income reported in their income tax return is correct. A taxpayer who holds investments will often rely on information provided by other parties to determine the amount to include in their assessable income. However, taxpayers must make appropriate judgements to ensure they report the correct amount of assessable income. | Detailed Reasoning - Application to the taxpayer's circumstances: 8. The Custodian holds the legal title to the units in the Trust as custodian for the taxpayer. Therefore, the taxpayer is treated as being a member of the Trust and having the determined member components for the 20XX income year (subsection 276-115(3)). 9. The taxpayer's AMMA statement in respect of its investment in the Trust disclosed the following information: Discounted Capital Gains - Taxable $X Discounted Capital Gains - Non-Taxable $X Foreign income tax offset - Capital ($X) Note 1 ... 10. Note 1 of the 2024 AMMA statement includes the following additional information in respect of the amount reported as 'Foreign income tax offset - Capital': The Trust paid $X foreign tax on share disposal generating gross long capital gains, which after applying residual capital losses, reduced the foreign income tax offset attributable to long capital gains to $X and that 50% of this is $X. 11. Therefore, although the AMMA statement discloses 'Foreign income tax offset - Capital' as $X (representing foreign income tax offsets applicable to capital gains), the additional information included in Note 1 provides sufficient detail for the taxpayer to understand what this amount comprises and how it was calculated - that is, this amount only reflects 50% of the gross foreign income tax offset in respect of long capital gains (or discountable capital gains). 12. Accordingly, the taxpayer's determined member component, of a character relating to foreign income tax offset applicable to discountable capital gains, is equal to the amount disclosed in Note 1 of their Attribution Managed Investment Trust Member Statement for the year ended 30 June 20XX (subsection 276-205(1)). | Detailed Reasoning - Question 2: Pursuant to subsection 770-10(1) of the ITAA 1997, is the taxpayer entitled to a foreign income tax offset, in respect of discountable capital gains attributed to it, equivalent to two-thirds of its determined member component, of a character relating to foreign income tax offset applicable to discountable capital gains, for the year ended 30 June 20XX? | Summary: For the purposes of subsection 770-10(1), the taxpayer is entitled to a foreign income tax offset equal to two-thirds of its determined member component, of a character relating to foreign income tax offset applicable to discountable capital gains, for the year ended 30 June 20XX. | Detailed Reasoning - Entitlement to foreign income tax offset: 1. Subsection 770-10(1) provides the basic entitlement rule for the foreign income tax offset and states that you are entitled to a tax offset for an income year for foreign income tax and an amount of foreign income tax counts towards the tax offset for the year if you paid it in respect of an amount that is all or part of an amount included in your assessable income for the year. | Detailed Reasoning - Attribution of AMIT income and tax offsets: 2. Pursuant to the provisions of Division 276, amounts relating to income and tax offsets of an AMIT, of a particular tax character, are attributed to members of the AMIT on the basis of their determined member components of that tax character. 3. Section 995-1 defines a member in relation to an entity as the meaning given by section 960-130. Item 3 of the table in subsection 960-130(1) provides that a member of a trust is a beneficiary, unitholder or object of the trust. | Detailed Reasoning - Section 276-80 - Member's assessable income or tax offsets for determined member components - general rules: 4. Section 276-80 provides the general rules in relation to components of an income character and components of a tax offset character. Components of income character (1) Subsection (2) applies if a *member of an *AMIT in respect of an income year has, for the income year, a *determined member component of: (a) a character relating to assessable income; or (b) a character relating to *exempt income; or (c) a character relating to *non-assessable non-exempt income. (2) For the purpose of working out the effects mentioned in subsection (3) for the *member, treat the member as having derived, received or made the amount reflected in the *determined member component: (a) in the member's own right (rather than as a member of a trust); and (b) in the same circumstances as the *AMIT derived, received or made that amount, to the extent that those circumstances gave rise to the particular character of that component. (3) The effects are as follows: (a) including an amount in the assessable income of the *member; (b) including an amount in the *exempt income of the member; (c) including an amount in the *non-assessable non-exempt income of the member; (d) determining whether the member has made a *capital gain from a *CGT event; (e) determining the extent to which the member's *net capital loss has been *utilised. Components of tax offset character (4) Subsection (5) applies if a *member of an *AMIT in respect of an income year has, for the income year, a *determined member component of a character relating to a *tax offset. (5) For the purpose of working out the effects mentioned in subsection (6) for the *member, treat the member as having paid or received the amount reflected in the *determined member component: (a) in the member's own right (rather than as a member of a trust); and (b) in the same circumstances as the *AMIT paid or received that amount. (6) The effects are as follows: (a) entitling the member to a *tax offset; (b) entitling the member to a credit under Division 18 in Schedule 1 to the Taxation Administration Act 1953 . | Detailed Reasoning - Application to the taxpayer's circumstances: 5. The Trust paid foreign taxes during the year ended 30 June 20XX, including $X in relation to long capital gains. The foreign taxes relate to income tax paid in Country A in relation to the disposal of shares listed in Country A. 6. As stated above, the taxpayer is treated as being a member of the Trust and having the determined member components for the 2024 income year (subsection 276-115(3)). 7. As a result, the taxpayer is treated as having paid the foreign income tax amount reflected in the determined member component in its own right and in the same circumstances as the Trust paid the amount (subsection 276-80(5)). 8. Having concluded that the taxpayer is considered to have paid the foreign tax amount, consideration must be given as to whether it was paid in respect of an amount that is all or part of an amount included in the taxpayer's assessable income. ATO Interpretative Decision ATO ID 2010/175 (ATO ID 2010/175) - Foreign income tax offset: entitlement where foreign capital gain is only partly assessable in Australia 9. ATO ID 2010/175 sets out the ATO view in regard to the application of subsection 770-10(1) where a resident of Australia pays foreign income tax on the whole of a foreign capital gain, which is only partly assessable in Australia and whether only a proportionate share of the foreign income tax counts towards the foreign income tax offset. 10. ATO ID 2010/175 states: The references in the objects provision to relieving 'double taxation' and 'amounts included in your assessable income' demonstrate that, where a taxpayer pays foreign tax on the whole of a capital gain but only a portion of that gain is assessable in Australia, the purpose of Division 770 is to only provide a foreign income tax offset for the portion of the gain that is included in assessable income and thus subject to taxation in both Australia and the foreign country (that is, double taxation). This can be described as an 'apportionment approach' to the allowance of a foreign income tax offset. Such an approach is also consistent with the approach explained in Note 2 to subsection 770-10(1) which states: If the foreign income tax has been paid on an amount that is part non-assessable non-exempt income and part assessable income for you for the income year, only a proportionate share of the foreign income tax (the share that corresponds to the part that is assessable income) will count towards the tax offset (excluding the operation of subsection (2)). 11. In Burton v Commissioner of Taxation [2019] FCAFC 141 (the Burton case), the Full Federal Court found that the reference in subsection 770-10(1) to foreign tax paid 'in respect of... an amount included in your assessable income' was a reference only to the proportion of the foreign tax paid on the net capital gain that was included in assessable income, as determined by subsection 102-5(1). 12. As such, the Burton case confirmed that where a resident of Australia pays foreign income tax on the whole of a foreign capital gain which is only partly assessable in Australia, only a proportionate share of the foreign income tax counts towards the foreign income tax offset under subsection 770-10(1). | Detailed Reasoning - Section 276-85 - Member's assessable income or tax offsets for determined member components - specific rules: Discount capital gains 13. The operation of the general rule in section 276-80 is modified if an entity that is a member of an AMIT in respect of an income year has, for the income year, a determined member component that is a discount capital gain. 14. Subsection 276-85(4) states that for the purposes of section 276-80 and section 276-85, treat the amount of the determined member component as being double what it would have been apart from that subsection. 15. The EM clarifies that: 7.37 This ensures that the member recognises the whole of the capital gain. If the member is entitled to a discount capital gain, the member will take the amount of the discount capital gain into account when working out their net capital gain. The discount percentage for the discount capital gain will be determined based on the member's characteristics. For example: • if the member is an Australian resident individual, the discount percentage will be 50 per cent; or • if the member is a complying superannuation fund, the discount percentage will be 33 1/3 per cent. | Detailed Reasoning - Application to the taxpayer's circumstances: 16. The taxpayer will treat their determined member component that is a discount capital gain as double the amount reported on their AMMA statement (subsection 276-85(4)) before applying the applicable discount percentage of 33 1/3 percent due to being a complying superannuation entity (subparagraph 115-100(b)(i)). 17. As only part of the foreign capital gains (being two-thirds of the grossed-up discount capital gain) will be assessable in Australia, the taxpayer must apportion their foreign income tax offset to reflect the amount that relates to the portion of the capital gain that is subject to taxation in both Australia and the foreign country - that is two-thirds of the grossed-up discount capital gain. 18. Accordingly, the taxpayer is entitled to a foreign income tax offset, in respect of discountable capital gains, equivalent to two-thirds of its determined member component, of a character relating to foreign income tax offset applicable to discountable capital gains, for the year ended 30 June 2024 (subsection 770-10(1)).

Reasons for decision: All legislative references in these reasons for decision are to the ITAA 1997, unless otherwise indicated. | Question 1: For the purposes of section 276-205 of the ITAA 1997, is the taxpayer's determined member component, of a character relating to foreign income tax offset applicable to discountable capital gains, equal to the amount disclosed in Note 1 of their Attribution Managed Investment Trust Member Statement, for the year ended 30 June 20XX?