Trust Consultation Sub-group issues register

Issue 12. Interaction between the trust assessing and CGT provisions

Issue 12.1	Will the analysis in ATO ID 2003/231 in relation to 'assets without the necessary connection with Australia' also apply to assets that are not 'taxable Australian property' in Division 855?
Current status	Resolved This issue was discussed at a meeting of the TCSG on 18 February 2008. Members of the sub-group were generally of the view that if the approach in the ATO ID is correct, then it would apply equally in respect of Division 855.
History of issue	This issue was referred to the TCSG from the 14 November 2007 meeting of the NTLG Losses and CGT Sub-committee.
Treasury advised?	Yes.

Issue 12.2	To determine whether paragraph 98(2A)(c) or 98(2A)(d) of the ITAA 1936 applies to a capital gain made by a trustee, it has to be determined whether the gain is attributable to a period when the beneficiary was a resident. But what is the period to which a capital gain is attributable?
Current status	Resolved This issue was discussed at a meeting of the TCSG on 18 February 2008. Members were generally of the view that a capital gain is attributable to the time when a relevant CGT event happens (rather than for example, the end of a trust's income year or the entire ownership period for an asset). On this view, if a beneficiary is a resident when a CGT event happens to a trust asset (and the beneficiary later ceases to be a resident), the trustee will be assessed under subsections 98(2A) and (3) even though the taxpayer is a non-resident at the end of the income year and the gain is not Australian sourced.
History of issue	This issue was referred to the Trust Consultation Sub-group from the 14 November 2007 meeting of the National Tax Liaison Group Losses and CGT Sub-committee.
Treasury advised?	Yes.

Issue 12.3	Does the section 855-40 Income Tax Assessment Act 1997 (ITAA 1997) exemption apply where a fixed trust distributes a capital gain to a discretionary trust, which in turn distributes the capital gain to a non-resident beneficiary?
Current status	Resolved This issue was discussed at a meeting of the TCSG on 18 February 2008. Members were generally in agreement that section 855-40 does not have any application in these circumstances.
History of issue	This issue was referred to the TCSG from the 14 November 2007 meeting of the NTLG Losses and CGT Sub-committee.
Treasury advised?	Yes.