Private ruling: Foreign pension - Foreign tax offset
Published: February 2014
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Are you entitled to claim a foreign Income Tax offset (FITO) on the x% withholding tax imposed by your overseas pension fund when you transfer the accumulated funds to an Australian pension fund? | No.

Relevant facts and circumstances: You are from overseas and are working in Australia on a work permit. You have a pension fund overseas. Your overseas fund will withhold x% tax when you transfer the accumulated funds to an Australian fund.

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

Reasons for decision: Detailed Reasoning - Foreign Income Tax Offset: If you have paid foreign tax in another country, you may be entitled to an Australian foreign income tax offset (FITO), which provides relief from double taxation. These rules apply for income years that start on or after 1 July 2008. Different rules apply for income periods up to 30 June 2008. To qualify for a FITO you must meet all of the following criteria: · You must have paid the foreign tax on the foreign income, · The foreign tax must be a tax which you were personally liable for, and · The income or gain that the foreign tax was paid must be included in your assessable income for Australian income tax purposes. The foreign income tax offset is a non-refundable tax offset. The foreign income tax offset is applied to your income tax liability including the Medicare levy and the Medicare levy surcharge where applicable. Any excess is not refunded to you. In your case, as the money you intend to transfer from your overseas pension fund does not need to be included in your assessable income for Australian income tax purposes, you are not able to claim a FITO for the x% withholding tax paid overseas.