Private ruling: Foreign Income Tax Offset
Date of advice: 5 May 2016
Published: June 2016
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Question and answer | Are you entitled to a foreign Income Tax Offset (FITO) for sales tax paid overseas? | No.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are a resident of Australia for taxation purposes. You are a partner in a foreign partnership in Country Y. You have paid sales tax in Country Y.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 770-15 | Income Tax Assessment Act 1997 Section 770-70

Reasons for decision: Summary: A taxpayer whose assessable income in Australia is also subject to foreign income tax and who has, or is deemed to have, paid the foreign income tax in the income year may be entitled to a foreign income tax offset (FITO) in Australia. The concept of 'foreign income tax' is intended to cover foreign taxes imposed on a basis that is substantially equivalent to income tax imposed under Australian law. 'Foreign income tax' is defined in section 770-15 of the Income Tax Assessment Act 1997 (ITAA 1997) as a tax imposed by a law other than an Australian law that is: • tax on income; or • tax on profits or gains, whether of an income or capital nature; or • any other tax, being a tax that is subject to an agreement having the force of law under the International Tax Agreements Act 1953. Sales tax is not income tax and is not a tax imposed on profits or gains of a capital or income nature and Australia does not have a double Tax Agreement (DTA) with Country Y. You are therefore not entitled to a FITO for the sales tax paid in Country Y.