CGT Reforms for non-residents (on or after 12 December 2006)
The Federal Government recently passed the CGT Reforms to reduce the Australian CGT base as it applies to non-residents who hold a direct interest in Australian entities. The CGT Reforms will also broaden the Australian CGT base as it applies to non-residents who dispose of interests in resident or non-resident entities whose "underlying" value is principally attributable to Australian real property.
As outlined above, a non-resident was previously only subject to Australian CGT on gains made in respect of assets that had the necessary connection with Australia. Such assets included land and buildings situated in Australia, shares or units in Australian companies or trusts (but excluding holdings of less than 10% in listed companies and unit trusts) and assets used at any time in carrying on a business through a permanent establishment in Australia.
Under the CGT Reforms, a non-resident will only be subject to Australian CGT in respect of Taxable Australian Property ('TAP'). The five categories of CGT assets that are TAP are:
(a) Taxable Australian real property
(b) a CGT asset that:
is an indirect Australian real property interest, and is not covered by (e) (c) a CGT asset that:
has been used at any time in carrying on a business through a permanent establishment and is not covered by (a), (b) or (e) (d) An option or right to acquire a CGT asset covered by item (a), (b) or (c), and
(e) A CGT asset that is covered by subsection 104-165(3) of the Income Tax Assessment Act 1997 (choosing to disregard a gain or loss on ceasing to be an Australian resident).
Taxable Australian real property is defined as real property situated in Australia, and also includes a mining, quarrying or prospecting right, if the minerals, petroleum or quarry materials are situated in Australia.
