Understanding the Process of Determining the FITO Limit
Recently, the ATO issued draft TD 2019/D10 on October 11, 2019, outlining its preliminary view on whether a foreign capital gain, on which a taxpayer hasn't paid any foreign income tax, would be excluded from the taxpayer's assessable income when calculating their FITO limit.
The ATO's stance is that no untaxed foreign capital gain would be excluded under S.770-75(4)(a)(i) because it's not an amount on which the taxpayer has paid foreign income tax, which counts towards FITO.
Additionally, the ATO argues that an untaxed foreign capital gain wouldn't be excluded under S.770-75(4)(a)(ii) either. This section applies to 'ordinary income' or 'statutory income' from a source other than an Australian one. Since only a net capital gain qualifies as statutory income, and it doesn't have a specific source, the ATO believes it can't be broken down to identify individual capital gains included in the calculation.
For further clarification, reach out to Tax Ideas Accountants & Advisers at +61 2 83181545 or schedule an appointment using our live calendar.
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