Private ruling: Foreign income tax offset
Date of advice: 22 January 2026
Published: 30 March 2026
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are foreign dividends received from XXXX assessable income under section 44 of the Income Tax Assessment Act 1936 (ITAA 1936)or section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: The foreign dividends are to be included in your assessable income under subsection 44(1) of the ITAA 1936. | Q2: Are you entitled to a foreign income tax offset under Division 770 of the ITAA 1997in relation to withholding tax imposed on dividends sourced from XXXX? | A2: Yes | Q3: If you are entitled to a foreign income tax offset under Division 770 of the ITAA 1997 in relation to withholding tax imposed on dividends sourced from XXXX, is the offset equal the amount of 35% withheld on the dividends paid? | A3: No. | Q4: What exchange rate should be used for translating foreign dividends and tax withheld to Australian dollars? | A4: The foreign dividends are to be translated at the exchange rate applicable at the time of receipt of the foreign dividends.

Relevant facts and circumstances: 1. You are a resident of Australia for taxation purposes. 2. You hold a trading account with XXX, a financial services company that offers online trading in shares. 3. Through XXX, you own shares in X companies listed on the XXXX in XXXX with the codes ABC and DEF (the XXXX companies). 4. Your shareholding in the X XXXX companies is less than 10%. 5. During the 20XX income year, you received dividends from the XXXX companies, net of 35% withholding tax, where applicable expressed in XXXX francs (XXX). 6. Dividend notifications from the XXXX companies provide the net amount in AUD credited to your account.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 44 | Income Tax Assessment Act 1936 subsection 44(1) | Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 6-10 | Income Tax Assessment Act 1997 subsection 6-10(4) | Income Tax Assessment Act 1997 section 10-5 | Income Tax Assessment Act 1997 Division 102 | Income Tax Assessment Act 1997 Division 770 | Income Tax Assessment Act 1997 section 770-10 | Income Tax Assessment Act 1997 section 770-15 | Income Tax Assessment Act 1997 section 770-130 | Income Tax Assessment Act 1997 Subdivision 960-C | Income Tax Assessment Act 1997 subsection 960-50(6) | International Tax Agreements Act 1953 subsection 5(1)

Reasons for decision: Detailed Reasoning - Question 1: Are foreign dividends received from XXXX assessable income under section 44 of the ITAA 1936 or section 6-5 of the ITAA 1997? | Summary: The foreign dividends received from XXXX are to be included in your assessable income under subsection 44(1) of the ITAA 1936. | Detailed Reasoning - Detailed reasoning: 1. Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident taxpayer includes statutory income from all sources, whether in or out of Australia. 2. Section 10-5 of the ITAA 1997 lists provisions about assessable income. Included in this list is subsection 44(1) of the ITAA 1936 which deals with dividends. 3. Subsection 44(1) of the ITAA 1936 provides that the assessable income of an Australian resident taxpayer, who is a shareholder of a company (whether the company is a resident or non-resident), includes dividends paid to the taxpayer by the company out of profits derived by it from any source. 4. Therefore, the foreign dividends you received are included in your assessable income under Australian income tax law. 5. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement (DTA) contained in the International Tax Agreements Act 1953 . 6. DTA's operate to avoid double taxation by allocating taxing rights and the claiming of tax credits between the countries party to a particular agreement. 7. A provision of the DTA between Australia and XXXX states that dividends paid by a company which is a resident of XXXX, being dividends to which a resident of Australia is beneficially entitled, may be taxed in Australia. The application of a DTA between Australia and XXXX is discussed at Question 3. 8. Therefore, the DTA does not prevent Australia from taxing the dividends to which a resident of Australia is beneficially entitled and the dividends are to be included in the Australian resident's assessable income under subsection 44(1) of the ITAA 1936. 9. As you received foreign dividends from X companies in XXXX, and you are a resident of Australia, these dividends received are to be included in your assessable income under subsection 44(1) of the ITAA 1936. | Detailed Reasoning - Question 2: Are you entitled to a foreign income tax offset under Division 770 of the ITAA 1997 in relation to withholding tax imposed on dividends sourced from XXXX? | Summary: You entitled to a foreign income tax offset under Division 770 of the ITAA 1997 in relation to withholding tax imposed on dividends sourced from XXXX. | Detailed Reasoning - Detailed reasoning: 10. Section 770-10 of the ITAA 1997 provides that a taxpayer is entitled to claim a foreign income tax offset for foreign income tax paid in respect of an amount that is included in the taxpayer's assessable income. 11. Section 770-15 of the ITAA 1997 specifies that foreign income tax means tax that is imposed under a law other than an Australian law and is: • tax on income • tax on profits or gains, whether of an income or capital nature, or • any other tax that is subject to an agreement covered by the International Tax Agreements Act 1953 . 12. The taxpayer must have paid the foreign income tax before an offset is available and they are deemed to have paid the tax if it was withheld from the income at its source. 13. You are entitled to a foreign income tax offset under Division 770 of the ITAA 1997 where you paid withholding tax in XXXX on the dividends paid to you on XX/XX/20XX and XX/XX/20XX. 14. No foreign income tax offset is available on the dividend paid to you on XX/XX/20XX, as no withholding tax was withheld. | Detailed Reasoning - Question 3: If you are entitled to a foreign income tax offset under Division 770 of the ITAA 1997 relating to withholding tax imposed on dividends sourced from XXXX, is the offset equal to the amount of 35% withheld on the dividends paid? | Summary: In relation to the dividends received from the XXXX companies, you are entitled to a foreign income tax offset equal to 15% as your shareholding in these XXXX companies is less than 10%. | Detailed Reasoning - Detailed reasoning: 15. In determining liability to Australian tax on any foreign sourced income such as foreign dividends, it is necessary to consider not only the income tax laws, but also the operation of any DTA contained in the International Tax Agreements Act 1953 that is applicable. 16. Subsection 5(1) of the International Tax Agreements Act 1953 contains a DTA between Australia and XXXX called the 'XXXX convention'. 17. Article 10 of the XXXX convention deals with dividends and states: 1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. 2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed: a) 5 per cent of the gross amount of the dividends if the beneficial owner is a company which, in the case of Australia, holds directly at least 10 per cent of the voting power in the company paying the dividends, or in the case of XXXX, holds directly at least 10 per cent of the capital in the company paying the dividends; b) 15 per cent of the gross amount of the dividends in all other cases. 18. As your shareholding in the XXXX companies is less than 10%, you are entitled to a foreign income tax offset of 15% of the gross dividends where tax was withheld by virtue of Article 10(4)(b) of the XXXX convention. 19. A refund of the difference between the withholding rate of 35% applied on the gross dividends received from XXXX and the 15% tax treaty rate as per the DTA is managed through the XXXX Federal Tax Administration. | Detailed Reasoning - Question 4: What exchange rate should be used for translating foreign dividends and tax withheld to Australian dollars? | Summary: The foreign dividends are to be translated from XX to AUD at the exchange rate applicable at the time of receipt. | Detailed Reasoning - Detailed reasoning: 20. Subdivision 960-C of the ITAA 1997 sets out the basic rules for converting foreign currency into Australian currency. The table in subsection 960-50(6) of the ITAA 1997 outlines the exchange rate at which amounts in respect of particular transactions are to be translated. 21. Foreign dividends are included in your assessable income as discussed at Question 1. Item 7 of the table in subsection 960-50(6) of the ITAA 1997 provides the translation rules for an amount of statutory income (other than an amount included in assessable income under Division 102 of the ITAA 1997 (this Division is about working out a net capital gain)), and states: a) if the amount is received at or before the time when the requirement first arose to include it in your assessable income - the amount is to be translated to Australian currency at the exchange rate applicable at the time of receipt; or b) in any other case - the amount is to be translated to Australian currency at the exchange rate applicable at the time when the requirement first arose to include it in your assessable income. 22. You received dividends net of withholding tax from the XXXX companies during the 20XX income year. The net dividends are to be translated from XXX to AUD at the exchange rate applicable at the time of receipt. 23. Dividend notifications from the XXXX companies provide the net amount in AUD credited to your account.

Does IVA apply to this private ruling?: Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement. | If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax. | We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. | If you want us to rule on whether Part IVA applies, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website ato.gov.au/gaar . Reasons for decision