How to Calculate the FITO Limit for Foreign Income Tax Offsets
Meta Description: Learn how to determine the Foreign Income Tax Offset (FITO) limit in Australia to avoid double taxation on foreign income. Discover the calculation method and practical tips to maximize your FITO claim.
If you've paid foreign income tax exceeding $1,000 and choose not to apply the de minimis cap, you need to calculate your FITO limit. Here's how it works:
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Start with your Australian tax payable for the income year, including Medicare levy and surcharge if applicable, before applying any tax offsets.
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Subtract the Australian tax payable if certain income and related deductions were excluded from your taxable income.
The income to be excluded from your assessable income includes:
- Amounts representing income subject to foreign income tax that contributes to the tax offset.
- Other ordinary or statutory income from a non-Australian source.
It's important to note that deductions reasonably related to the excluded income are also excluded, except for debt deductions and certain specified debt deductions.
Tax Tip: By excluding foreign income under this provision, you can potentially increase your FITO limit and consequently, your FITO claim.
Understanding how to calculate the FITO limit is crucial for maximizing your relief from double taxation on foreign income. For personalized assistance or questions, reach out to Tax Ideas Accountants & Advisers at +61 2 83181545 or book an appointment through our live calendar.
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