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ATO Interpretative Decision

ATO ID 2001/254 (Withdrawn)

Income Tax
Assessability of Papua New Guinea bank interest derived by a resident

Attention This ATO ID is withdrawn. Guidance on the issue contained in this ATO ID can be found at Investment income (QC 31937).
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 23 February 2018.

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Issue

Is bank interest derived by the taxpayer in Papua New Guinea (PNG) assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes. Bank interest derived by the taxpayer in PNG is assessable income under section 6-5 of the ITAA 1997. The taxpayer is entitled to a foreign tax credit in Australia for PNG income tax levied on that interest income.

Facts

The taxpayer is an Australian resident for taxation purposes in accordance with Australian law and for the purposes of the Double Taxation Agreement between Australia and PNG. The taxpayer derived interest from a bank in PNG.

Reasons for Decision

Paragraph 11(1) of schedule 29 of the International Tax Agreements Act 1953 (Agreements Act) provides that the interest income derived in PNG by the taxpayer may be taxed in PNG.

However, in accordance with paragraph 11(2) of schedule 29 of the Agreements Act, the tax imposed by PNG shall not exceed 10 percent of the gross amount of the interest derived by the taxpayer.

As the taxpayer is an Australian resident for taxation purposes, the taxpayer will be assessed in Australia on interest derived from PNG.

Under paragraph 23(1), where PNG income tax has been levied on the interest derived by the taxpayer in PNG, a credit will be allowable in Australia against tax payable on that interest.

Note: With effect from 1 July 2008 the foreign tax credit system is replaced by the foreign income tax offset system. This ATO ID is still current.

Date of decision: 17 July 2001

Legislative References:
Income Tax Assessment Act 1997
   section 6-5

International Tax Agreements Act 1953
   Schedule 29, Article 11(1)
   Schedule 29, Article 23(1)

Keywords
Double tax agreements
Interest income
Foreign tax credits
Income
International tax

Business Line: Small Business/Individual Taxpayers

Date of publication: 27 August 2001

ISSN: 1445-2782

ATO ID 2001/254 (Withdrawn) history   Top  
   Date   Version 
   17 July 2001   Original statement   
 You are here ®  23 February 2018   Withdrawn   


 


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