Private ruling: CGT - taxable Australian property
Date of advice: 27 June 2023
Published: 14 August 2023
Ruling period: Year ending 30 June 2023 | Year ending 30 June 2024
Date scheme commenced: 1 July 2022

Ruling: Q1: Are the aquaculture leases and licenses held by the taxpayer Taxable Australian Property in accordance with section 855-15 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

Relevant facts and circumstances: The taxpayer is a resident of Country B and is not a resident of Australia for tax purposes. The taxpayer has a X% ownership interest in various Australian aquaculture leases and licenses. The taxpayer has a Y% interest in an Australian Limited Liability Partnership. The Australian Limited Liability Partnership has previously conducted a business of farming mussels in Australia and has utilised the Australian aquaculture leases and licenses in that enterprise. The Australian Limited Liability Partnership currently has a Z% interest in a partnership business (with an unrelated party) of farming mussels in Australia and utilises the Australian aquaculture leases and licenses in this enterprise. The taxpayer is in discussions that may potentially result in the disposal of some of the aquaculture leases and licenses.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 855-10 | Income Tax Assessment Act 1997 section 855-15 | Income Tax Assessment Act 1997 section 855-35

Reasons for decision: Summary: Subsection 855-10(1) of the ITAA 1997 provides that you disregard a capital gain or capital loss from a CGT event if: (a) you are a foreign resident, or the trustee of a foreign trust for CGT purposes, just before the CGT event happens; and (b) the CGT event happens in relation to a CGT asset that is not taxable Australian property. Section 855-15 of the ITAA 1997 explains when an asset is taxable Australian property. There are 5 categories of CGT assets that are taxable Australian property including Taxable Australian real property (section 855-20 of the ITAA 1997), a CGT asset that is an indirect Australian real property interest (section 855-25 of the ITAA 1997) and a CGT asset that you have used at any time in carrying on a business through: • if you are a resident in a country that has entered into an international tax agreement with Australia containing a permanent establishment article - a permanent establishment (within the meaning of the relevant international tax agreement) in Australia | Detailed Reasoning - Application to your circumstances: In this case the relevant trust is a resident of Country B. Australia has an international tax agreement with Country B that contains a permanent establishment article. The aquaculture leases and licenses held by the taxpayer are Taxable Australian Property in accordance with section 855-15 of the ITAA 1997, being assets used in a business being carried on through a permanent establishment in Australia. The capital gain or loss resulting from a disposal may be reduced in accordance with the fraction prescribed in subsection 855-35(3) of the ITAA 1997, if the asset was used in business for only part of the period from when you acquired it, to when the CGT event occurs.