Burton v Commissioner of Taxation [2019] FCAFC 141

TAXATION – foreign income tax offset – s 770-10 of the Income Tax Assessment Act 1997 (Cth) – where taxpayer paid tax in the United States on gains made from the sale of certain assets in that country – where gains were also taxable in Australia – where gains were derived on capital account for Australian tax purposes – where 50% capital gains tax discount applied – where Commissioner denied the taxpayer a foreign income tax offset against his tax liability in Australia on the gains to the extent of half of the tax paid in the United States – whether the capital gains before the application of capital losses and the capital gains tax discount were “included in” the taxpayer’s assessable income for the purposes of s 770-10 – whether the full tax paid in the United States on the gains was paid “in respect of” the Australian net capital gain for the purposes of s 770‑10 TAXATION – treaty interpretation – Art 22(2) of the double tax convention between Australia and the United States – where Art 22(2) of the double tax convention between Australia and the United States requires Australia to allow as a credit against Australian tax the US tax paid “in respect of income derived from sources in the United States” – whether the gain constitutes “income derived from sources in the United States” – whether the gain “in respect of” which tax is paid refers to the whole of the gain taxed in the United States or the discounted gain taxed in Australia – where the double tax convention was incorporated into Australian law pursuant to s 5 of theInternational Tax Agreements Act 1953 (Cth) – whether there is an inconsistency between Art 22(2) and s 770-10 of the Income Tax Assessment Act 1997 (Cth)

Full decision here