Private ruling: CGT Event I1
Date of advice: 28 July 2016
Published: September 2016
Ruling period: Income tax year ended 30 June 2017 | Income tax year ended 30 June 2018 | Income tax year ended 30 June 2019 | Income tax year ended 30 June 2020
Date scheme commenced: 01 July 2016

Ruling: A1: No.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Background Company A is an Australian incorporated company and is a resident of Australia for Australian tax purposes. Company A is a company that deals in finance. Previously Company A had conducted business in both the Country Z and Australia; however, in 20XX Company A sold the Australian business. Company A is listed on the Australia Securities Exchange (ASX), with the company having been incorporated in 20AA. Company A shareholders comprise a mix of individuals, companies, superannuation funds and non-residents. Company A is the head company of an Australian consolidated group, which consolidated with effect from January 20BB. Company A's wholly owned Australian subsidiary in the group is dormant. Company A is seeking potential investment from a Country Z investor to fund the expansion of Company A's business in the Country Z and elsewhere. As part of this capital-raising proposal, Company A is going to increase its number of Country Z tax resident directors and conduct its board meeting in the Country Z from a future specified date (kick-off date). Company A intends for its central management and control to be relocated to the Country Z from the kick-off date. It will become a resident in the Country Z for the purposes of the Country Z domestic tax law. Assumption Article 4(4) of the Double Tax Agreement between Australia and Country Z ("the Country Z agreement") deems Company A to be a resident solely of the Country Z from the kick-off date for the purposes of the Country Z agreement.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-60 | Income Tax Assessment Act 1997 subsection 104-60(1) | Income Tax Assessment Act 1997 subsection 104-60(2) | Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision: Summary: CGT event I1 happens when an individual or company stops being an Australian resident: subsection 104-160(1) and (2). Subsection 995-1 defines 'Australian resident' to mean a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). For a company, subsection 6(1) of the ITAA 1936 defines 'resident' or 'resident of Australia' to mean: • a company which is incorporated in Australia, or • if the company is not incorporated in Australia, it carries on business in Australia, and has either its central management and control in Australia, or its voting power controlled by shareholders who are residents of Australia. Company A is an Australian incorporated company and is therefore a resident for Australian domestic tax law purposes. While Company A's central management and control will move to the Country Z and will become a resident in the Country Z for the purposes of the Country Z domestic tax law, Company A continues to be a company incorporated in Australia. Therefore, Company A will continue to be a resident of Australia under the definition in subsection 6(1) of the ITAA 1936. This is the case even if article 4(4) of the Country Z agreement deems Company A to be a resident solely of the Country Z from the kick-off date for the purposes of the Country Z agreement. This is based on the principle set out in paragraph 66 of TR 98/17 Income tax - residency status of individuals entering Australia . Therefore, Company A's Australian resident status is not lost for purposes of the general operation of the Australian domestic tax law. This means that Company A does not stop being an Australian resident after the kick-off date and CGT Event I1 in section 104-160 will not arise in these circumstances. Therefore, Company A (an Australian incorporated company) will not have a capital gain or capital loss under section 104-160 when it becomes a Country Z resident for the purposes of Country Z domestic tax law after the kick-off date.

Subject: CGT Event I1: Will Company A, an Australian incorporated company, have a capital gain or capital loss under section 104-160 (CGT event I1) of the Income Tax Assessment Act 1997 when it becomes a Country Z resident, from the kick-off date, for the purposes of Country Z domestic tax law?