Topics on claiming foreign income tax offsets (4)



Recent case highlights dangers with claiming a FITO for capital gains – Burton’s case continues

  • The Commissioner took the view that because the capital gains were discounted by 50%, only 50% of the tax paid in the USA should count towards a FITO. Consequently, the taxpayer’s assessments were amended to partially deny the FITOs that had been claimed, as follows:
  • For the 2011 income year, 50% of the FITO claimed was denied on the basis that the capital gains had been reduced by 50% under the CGT general discount.
  • For the 2012 income year, over 50% of the FITO claim was denied, reflecting the application of (unrelated) capital losses of the taxpayer and the CGT general discount.
  • The taxpayer’s objections to the amendments were disallowed by the Commissioner on the basis of the ATO’s interpretation of when an entitlement to a FITO arises under S.770-10(1). The ATO’s view in this regard is outlined in ID 2010/175, and states that:

“..where a resident of Australia pays foreign income tax on the whole of a foreign capital gain but only 50% of the gain is included in the assessable income of the taxpayer in Australia because the taxpayer is entitled to the CGT discount, only 50% of the foreign income tax counts towards the foreign income tax offset under subsection 770-10(1) of the ITAA 1997.”


  • Should you have any queries, please contact Tax Ideas Accountants & Advisers on +61 2 83181545
  • Alternatively, you can book an appointment in our live calendar.


Written by Panbo Ye

I help people discover POWERFUL unknowns in Tax Ideas | Wealth Strategies | Retirement Planning | Finance Solutions!

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