Private ruling: Capital gains tax
Date of advice: 16 November 2016
Published: March 2017
Ruling period: Year ended 30 June 201X | Year ended 30 June 201X | Year ending 30 June 201X | Year ending 30 June 201X
Date scheme commenced: 1 July 201X

Ruling: Q1: Can you disregard any capital gain or loss from the disposal of shares on the basis that you are a temporary resident? | A1: Yes.

Relevant facts and circumstances: You and your partner are citizens of Country X who hold temporary visas and are Australian residents for tax purposes. Neither you nor your partner has a protected special category visa or has applied for Australian permanent residency or Australian citizenship. You acquired shares in an Australian private company that were not acquired under an Employee Share Scheme. The company had no direct or indirect interest in Australian real property (that is, taxable Australian property). You have disposed of some of the shares in the company.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 768-R | Income Tax Assessment Act 1997 Section 768-915 | Income Tax Assessment Act 1997 Division 855 | Income Tax Assessment Act 1997 Subsection 855-10(1) | Income Tax Assessment Act 1997 Section 995-1

Reasons for decision: Summary: Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) states that you are a temporary resident of Australia if: ● you hold a temporary visa granted under the Migration Act 1958 ; ● you are not an Australian resident within the meaning of the Social Security Act 1991 ; and ● your spouse is not an Australian resident within the meaning of the Social Security Act 1991 . Under the Social Security Act 1991 , an Australian resident is a person who is living in Australia and is an Australian citizen, a permanent visa holder or a protected special category visa holder. In your case, you and your partner hold temporary visas granted under the Migration Act 1958 and are not Australian residents within the meaning of the Social Security Act 1991 . Therefore, you are a temporary resident of Australia. Subdivision 768-R of the ITAA 1997 provides that the foreign source income (apart from income derived from working overseas) and capital gains of a temporary resident are not taxable in Australia. Further, section 768-915 of the ITAA 1997 allows a taxpayer to disregard a capital gain or capital loss they make from a capital gains tax (CGT) event if they are a temporary resident when, or immediately before, the CGT event happens provided the capital gain or capital loss would have been disregarded under Division 855 of the ITAA 1997 if the taxpayer were a foreign resident at that time. A capital gain or capital loss that a taxpayer makes from a CGT event happening in relation to non-taxable Australian property is disregarded under subsection 855-10(1) of the ITAA 1997 if the taxpayer is a foreign resident, or the trustee of a foreign trust for CGT purposes, just before the CGT event happens. In your case, you are a temporary resident who disposed of shares that were non-taxable Australian property and the capital gain or loss you made from the disposal would have been disregarded if you were a foreign resident. Therefore, you can disregard the capital gain or loss you made from the disposal of the shares.