Commonwealth Numbered Acts

TAXATION LAWS AMENDMENT (FOREIGN TAX CREDITS) ACT 1986 No. 51 of 1986 - SECT 3

3. After section 6A of the Principal Act the following sections are inserted:
Foreign income and foreign tax

"6AB. (1) A reference in this Act to foreign income is a reference to income
derived from sources in a foreign country or foreign countries.

"(2) A reference in this Act to foreign tax is a reference to tax imposed by a
law of a foreign country, being-

   (a)  tax upon income;

   (b)  tax upon profits or gains, whether of an income or capital nature;

   (c)  tax deemed, by virtue of section 160AFC, to have been paid in respect
        of a dividend; or

   (d)  any other tax, being a tax that is subject to an agreement having the
        force of law under the Income Tax (International Agreements) Act 1953,
        but does not include a unitary tax.

"(3) Where a taxpayer has derived an amount of foreign income and-

   (a)  foreign tax has been paid in respect of that income-

        (i)    by or through another person under an arrangement with the
               taxpayer or under the law relating to that tax;

        (ii)   by a trust estate in which the taxpayer is a beneficiary;

        (iii)  by a partnership in which the taxpayer is a partner; or

        (iv)   by deduction; or

   (b)  foreign tax in respect of that income is levied on, and paid by, the
        taxpayer's spouse, the taxpayer shall be deemed, for the purposes of
        this Act, to have been personally liable for, and to have paid, that
        foreign tax in respect of that income.

"(4) Where-

   (a)  a taxpayer has, as a beneficiary in a trust estate or by virtue of any
        other beneficial interest, derived an amount of foreign income (in
        this sub-section referred to as the 'derived amount') attributable to
        another amount of foreign income (in this sub-section referred to as
        the 'primary amount');

   (b)  in respect of the primary amount, foreign tax has been paid by any
        person (directly or by deduction); and

   (c)  because of the payment of that tax, the derived amount is less than
        the amount that would otherwise have been the derived amount, the
        taxpayer shall be deemed, for the purposes of this Act, to have been
        personally liable for, and to have paid, in respect of the derived
        amount, an amount of foreign tax equal to the difference between the
        amounts referred to in paragraph (c).

"(5) Where, under regulations made by virtue of section 160AFF, or under an
agreement having the force of law under the Income Tax (International
Agreements) Act 1953, an amount of foreign tax not actually paid is deemed to
have been paid, that amount shall, for the purposes of this Act, be deemed to
have been paid.

"(6) In this section-
'law', in relation to a foreign country, means a law of that country, or of
any part of, or place in, that country;
'unitary tax' means tax imposed by a law of a foreign country, being a law
which, for the purposes of taxing income, profits or gains of a company
derived from sources within that country, takes into account, or is entitled
to take into account, income, losses, outgoings or assets of the company (or
of a company that for the purposes of that law is treated as being associated
with the company) derived, incurred or situated outside that country, but does
not include tax imposed by that law if that law only takes those matters into
account-

   (a)  if such an associated company is a resident for the purposes of that
        law; or

   (b)  for the purposes of granting any form of relief in relation to tax
        imposed on dividends received by one company from another company.
        Grossing-up of foreign income

"6AC. (1) Where a resident taxpayer has derived an amount of foreign income
and has paid an amount of foreign tax in respect of that income, the amount of
foreign income shall, for the purposes of this Act, be taken to be the amount
of that income before payment of that tax.

"(2) Where a person is, by virtue of section 160AFC, deemed to have paid an
amount of foreign tax in respect of a dividend, the dividend shall, for the
purposes of this Act (other than that section), be deemed to be increased by
the amount of that tax.".