Private ruling: Capital gains tax
Date of advice: 2 July 2025
Published: 25 August 2025
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the Trust entitled to the CGT exemption under section 855-10 of the Income Tax Assessment Act 1997 ? | A1: No.

Relevant facts and circumstances: The Trust is a discretionary trust. The Trust was set up to purchase and hold shares. The trustee for the Trust is a company incorporated in Australia. The appointer and beneficiaries of the Trust moved overseas a number of years ago and reside there. The trustee has written to the share registries to have non-resident dividend/distributions withholding tax withheld. Tax has been withheld for a number of income years. Shares have been acquired subsequently via dividend reinvestment plans. Some of these shares have now been sold and the capital gains distributed to non-resident beneficiaries.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1997 section 855-10 | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Summary: Under section 855-10 of the Income Tax Assessment Act 1997 (ITAA 1997), a CGT exemption for assets that are not taxable Australian property may apply to a 'foreign trust for CGT purposes'. The terms resident and resident of Australia are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). Section 995-1 of the ITAA 1997 defines 'foreign trust for CGT purposes' to mean a trust that is not a 'resident trust for CGT purposes'. Under the definition of 'resident trust for CGT purposes' in section 995-1 of the ITAA 1997, a trust that is not a unit trust will be a resident trust for CGT purposes if a trustee is an Australian resident OR the central management and control of the trust is in Australia. The Trust is a discretionary trust. The definition of a resident in subsection 6(1) of the ITAA 1936 includes a company which is incorporated in Australia. The trustee company of the Trust was incorporated in Australia. The company is therefore a resident of Australia under subsection 6(1) of the ITAA 1936. As the trustee of the Trust is an Australian resident, the Trust will be a 'resident for CGT purposes' under the definition in section 995-1 of the ITAA 1997,. As the Trust is not a 'foreign trust for CGT purposes', the exemption to CGT provided by section 855-10 of the ITAA 1997 will not apply to the shares of the Trust.