Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
XXXXXXXXXX
Dear: Madam
RE: Canada-Australia Income Tax Convention (the"Convention")
This is in reply to your letter of December 30, 1992. You indicated that you own real property in Australia from which you derive rental income and are inquiring as to the proper treatment of such income under the Canadian Income Tax Act (the "Act) and Article 6 of the Convention. We have assumed that you are a resident of Canada for the purposes of the Act and the Convention.
Paragraph 1 of Article 6 of the Convention indicates that income from real property may be taxed in the Contracting State where it is situated (Australia). It does not deny the other Contracting State (Canada) the right to also tax such income. Accordingly, the income you derive from real property situated in Australia may be taxed in both Australia and Canada. However, where income or profits taxes have been paid to Australia in respect of the rental income, Canada must permit a foreign tax credit in respect of such foreign taxes in computing your tax payable under the Act. Subsection 126(1) of the Act and paragraph 2 of Article 23 of the Convention provide the authority for claiming a foreign tax credit.
In the event you have paid taxes to Australia and you are unable to claim a foreign tax credit in respect of the full amount such taxes paid for the year (see the federal foreign tax calculation on Schedule 1 - Detailed Tax Calculation), you are permitted to deduct the excess in computing your property (rental) income pursuant to subsection 20(12) of the Act. Any claim made under subsection 20(12) of the Act must be deducted from the foreign taxes paid in calculating your foreign tax credit.
If you have paid taxes to Australia in respect of your 1991 rental income, in order to claim the foreign tax credit and/or the 20(12) deduction, it will be necessary for you to send a request to the Shawinigan Taxation Centre to re-assess your 1991 tax return along with any information necessary to make the re-assessment. Your request should include a completed "Schedule 1 - Detailed Tax Calculation" (attached). We have also attached a copy of Form T2209 Calculation of Foreign Tax Credit should you require one.
We trust the above will be of assistance to you.
Yours truly,
for DirectorReorganizations and Foreign DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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