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Firstly, ATO Taxation Ruling No. IT 2507 states that income tax paid in China is eligible for credit against Australian tax.
Assuming you paid income tax in China, then if the total Chinese income tax paid is less than or equal to $1,000, you are not required to calculate the foreign income tax offset limit. You can claim a tax offset for the whole amount.
However If the total foreign income tax paid is greater than $1,000, there are two options available.
Firstly, you can choose to offset only $1,000 of Chinese income tax paid which means that it is not necessary to calculate the foreign income tax offset limit. However, any Chinese income tax paid in excess of the $1,000 limit will be wasted.
The second option is to calculate the ‘foreign income tax offset limit’. The foreign income tax offset limit is calculated as the difference between the following amounts:
The Australian income tax that would be payable if you include the double-taxed amounts and other assessable amounts that do not have an Australian source; and The Australian income tax that would be payable if you exclude those amounts.
Refer to the ATO link below for more info:
https://www.ato.gov.au/printfrie ... fset-rules-2014-15/ |
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