Allowance of foreign tax credit against Medicare levy
Posted on: 08/11/2011
Allowance of credit for foreign tax paid against Australian tax payable, including the Medicare levy
On 23 September 2011 we published ATO Interpretative Decision 2011/75, which states that we will allow a credit for Papua New Guinea (PNG) tax paid on PNG sourced income, to reduce an Australian resident's Australian tax payable, including the Medicare levy.
The ATO has now reviewed all of the other tax treaties that Australia has entered into and concluded that they are sufficiently similar to the PNG tax treaty to produce the same outcome. This means that the ATO will allow a credit for foreign tax paid in a country that we have a tax treaty with, against Australian tax payable (which includes the Medicare levy).
The ATO will provide further advice in the coming weeks.