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  • Foreign residents and taxable Australian property

    Foreign residents (except beneficiaries of resident non-fixed trusts) can disregard a capital gain or loss from a CGT event (such as a disposal), unless that CGT asset is taxable Australian property (TAP).

    TAP comprises of:

    • taxable Australian real property (TARP)
    • indirect Australian real property interests (see Indirect interests in Australian real property)
    • assets used in carrying on a business through a permanent establishment in Australia
    • an option, or right, to acquire any of the above assets.

    Foreign residents disposing of TAP are expected to lodge returns advising of any gain or loss.

    Foreign residents attract our attention if they:

    • hold significant direct or indirect interests in TAP assets – for example, shares in mining companies and interests in commercial properties
    • dispose of TARP or indirect interests but do not meet their CGT obligations in relation to the disposal
    • characterise or value assets in a way to come within the CGT exclusion
    • enter into a series of transactions such as 'staggered sell-down' arrangements that attempt to come within the CGT exclusion
    • lodge returns that are not in accordance with new associate inclusive test in determining total participation interests
    • fail the principal asset test by inappropriately allocating significant market value to non-TARP assets
    • are unlikely to have sufficient funds or assets remaining in Australia to meet their tax obligation relating to a disposal of a TARP.

    For information on staggered sell-down arrangements and exploiting asset valuations to avoid capital gains tax, see:

    • TA 2008/19 Foreign residents attempting to avoid Australian capital gains tax by certain 'staggered sell down' arrangements
    • TA 2008/20 Foreign residents exploiting asset valuations to avoid capital gains tax.
    Last modified: 24 Aug 2022QC 69441