Private ruling: Dividend - foreign tax credit
Published: January 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Is the foreign tax credit on foreign dividend claimable by an Australian resident? | A1: No

Relevant facts and circumstances: You are an Australian resident for tax purpose. You inherited some shares of Company A (a foreign company) from your father over 30 years ago. You were not a foreign resident at the time you obtained the shares. You receive dividends from these shares which are taxed in the foreign country. There is a tax credit on the taxed amount effective for foreign resident taxpayers. The tax credits in the hands of foreign resident taxpayer relates to the dividend payment in a manner somewhat similar to, though not the same as the way the franking credits from an Australian company to an Australian taxpayer count here.

Relevant legislative provisions: Subsection 6-10(4) of the Income Tax Assessment Act 1997 | Subsection 6-10(2) of the Income Tax Assessment Act 1997 | Subsection 44(1) of the Income Tax Assessment Act 1936 | Section 207-20 of the Income Tax Assessment Act 1997

Reasons for decision: Summary: Subsection 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997) states: If you are an Australian resident, your assessable income includes your statutory income from all sources, whether in or out of Australia. Subsection 6-10(2) of the ITAA 1997 defines 'statutory income' as amounts that are not ordinary income, but are included in your assessable income by provisions about assessable income. Dividends are statutory income by virtue of subsection 44(1) of the ITAA 1936. In your case you received dividend from a Company A. There was a tax credit on the taxed amount which was available to foreign resident taxpayers against their foreign tax payable. This is not an Australian franking credit and no credit is available in Australia for this amount.