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 interests in Australian real property interests
- 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.