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 a capital gain made on the disposal of shares as distributed to you by the trustee of a trust on the basis that you are a temporary resident? | A1: Yes

Relevant facts and circumstances: You are a citizen of Country X who holds a temporary visa and you are an Australian resident for tax purposes. You do not have a protected special category visa and have not applied for Australian permanent residency or Australian citizenship. You do not have a spouse who is an Australian resident within the meaning of the Social Security Act 1991 . You received a capital gain from the disposal of shares via a distribution from the trustee of a discretionary trust. The shares were held in a company that had no direct or indirect interest in Australian real property (that is, taxable Australian property).

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 hold a temporary visa granted under the Migration Act 1958 and are not an Australian resident 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 received a capital gain via a distribution from the trustee of a trust that related to the disposal of shares that were non-taxable Australian property, and the capital gain you received would have been disregarded if you were a foreign resident. Therefore, you can disregard the capital gain from the disposal of the shares as distributed to you by the trustee of the trust.