Understanding Foreign Income Tax Offsets for Capital Gains in Australia
Meta Description: Learn how Australian residents can avoid double taxation on foreign income with Foreign Income Tax Offsets (FITO), especially concerning foreign capital gains. Get insights on recent developments and practical implications for FITO claims.
In Australia, if you're a resident taxpayer, you're generally taxed on your income worldwide. But if you've already paid tax on that income in another country, you might be able to avoid double taxation through a non-refundable Foreign Income Tax Offset (FITO) under Division 770 of the ITAA 1997.
Recently, there have been important changes affecting how FITO is calculated, especially when it comes to foreign capital gains:
Partly Assessable Foreign Capital Gains: If you've made capital gains abroad that are only partially taxed in Australia (like when you've applied the CGT general discount), recent cases like Burton v FCT [2019] FCAFC 141, also known as Burton's case, shed light on how FITO is calculated in these situations.
Untaxed Foreign Capital Gains: Your FITO entitlement might be capped, meaning there's a limit to how much relief you can claim. The ATO's draft taxation determination, TD 2019/D10, suggests that untaxed foreign capital gains shouldn't be excluded when calculating this limit, potentially affecting your FITO claim.
Understanding these issues is crucial for anyone dealing with foreign capital gains and seeking FITO relief. For further assistance or questions, reach out to Tax Ideas Accountants & Advisers at +61 2 83181545 or book an appointment through our live calendar.