ATO Interpretative Decision
ATO ID 2005/110
Income Tax
Capital Gains Tax: small business concessions - maximum net asset value test - non-resident's worldwide assetsFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Are the worldwide CGT assets of a non-resident of Australia included in the net value of their CGT assets in determining if they satisfy the maximum net asset value test in section 152-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. The worldwide CGT assets of a non-resident of Australia are included in the net value of their CGT assets in determining if they satisfy the maximum net asset value test in section 152-15 of the ITAA 1997.
Fact
A non-resident disposed of a farm in Australia and made a capital gain.
The net value of the non-resident's (and other related entities) CGT assets having the necessary connection with Australia does not exceed $5 million. The net value of the non-resident's worldwide CGT assets exceeds $5 million.
Reasons for Decision
A non-resident makes a capital gain or capital loss from a CGT event only if the CGT asset has the necessary connection with Australia (section 136-10 of the ITAA 1997). The categories of CGT assets having the necessary connection with Australia are set out in section 136-25 of the ITAA 1997. Land in Australia is a CGT asset having the necessary connection with Australia.
If a non-resident makes a capital gain under section 136-10 of the ITAA 1997, the small business CGT concessions may apply if all the conditions are satisfied.
One of the conditions is the maximum net asset value test in section 152-15 of the ITAA 1997. Under this test, the net value of the CGT assets of the taxpayer and certain related entities must not exceed $5 million.
Section 152-20 of the ITAA 1997 includes all the CGT assets of the taxpayer and related entities (subject to the exclusions in section 152-20 of the ITAA 1997) regardless of whether they are located in Australia or elsewhere.
Accordingly, a non-resident's worldwide CGT assets are included in the net value of their CGT assets in determining if they satisfy the $5 million maximum net asset value test in section 152-15 of the ITAA 1997.
Date of decision: 22 March 2005Year of income: Year ended 30 June 2004
Legislative References:
Income Tax Assessment Act 1997
section 136-10
section 136-25
section 152-15
section 152-20
Keywords
Basic conditions for relief
Capital gains tax
CGT small business relief
Maximum net asset value test
Non resident individuals
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 22 March 2005 | Original statement |
| 15 January 2010 | Archived |