Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) There is a limit (the offset limit ) on the amount of your * tax offset for a year. If your tax offset exceeds the offset limit, reduce the offset by the amount of the excess.
(2) Your offset limit is the greater of:
(a) $1,000; and
(b) this amount:
(i) the amount of income tax payable by you for the income year; less
(ii) the amount of income tax that would be payable by you for the income year if the assumptions in subsection (4) were made.
Note 1: If you do not intend to claim a foreign income tax offset of more than $1,000 for the year, you do not need to work out the amount under paragraph (b).
Note 2: The amount of the offset limit might be increased under section 770 - 80.
(3) For the purposes of paragraph (2)(b), work out the amount of income tax payable by you, or that would be payable by you, disregarding any * tax offsets.
(4) Assume that:
(a) your assessable income did not include:
(i) so much of any amount included in your assessable income as represents an amount in respect of which you paid * foreign income tax that counts towards the * tax offset for the year; and
(ii) any other amounts of * ordinary income or * statutory income from a source other than an * Australian source; and
(b) you were not entitled to any deductions that:
(i) are * debt deductions that are attributable to an * overseas permanent establishment of yours; or
(ii) are deductions (other than debt deductions) that are reasonably related to amounts covered by paragraph (a) for that year.
Note: You must also assume you were not entitled to any deductions for certain converted foreign losses: see section 770 - 35 of the Income Tax (Transitional Provisions) Act 1997 .
Example: If an entity has paid foreign income tax on a capital gain that comprises part of its net capital gain, only that capital gain on which foreign income tax has been paid is disregarded.