ATO Interpretative Decision
ATO ID 2006/121
Income tax
Capital gains tax: Australian resident - disposal of residential property in SingaporeFOI status: may be released
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This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions.
Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series. The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953.
Status of this decision: Decision Current
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Is a net capital gain, that is made up of a capital gain, made by an Australian resident taxpayer from the disposal of a residential property in Singapore assessable income under section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. A net capital gain that is made up of a capital gain, made by an Australian resident taxpayer from the disposal of a residential property in Singapore is assessable income under section 6-10 of the ITAA 1997.
Facts
The taxpayer is an Australian resident for income tax purposes.
The taxpayer owns a residential property in Singapore.
The taxpayer disposes of the property in Singapore and makes a capital gain.
The taxpayer is only entitled to a partial exemption under Subdivision 118-B of the ITAA 1997.
Reasons for Decision
Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of a resident includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997).
Section 10-5 of the ITAA 1997 lists the provisions about assessable income. Included in this list is section 102-5 of the ITAA 1997 which provides that a net capital gain is to be included in assessable income. The capital gains from each CGT event are used in the calculation of the net capital gain (section 102-5).
However, in determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (the Agreements Act).
Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one.
Schedule 5 to the Agreements Act contains the tax treaty between Australia and Singapore (the Singapore Agreement). Schedule 5A to the Agreements Act contains the Protocol amending the Singapore Agreement (the Protocol). The Singapore Agreement and the Protocol operate to avoid the double taxation of income received by Australian and Singaporean residents.
Article 10A(1) of the Singapore Agreement provides that income or gains derived by a resident of Australia from the alienation of real property situated in Singapore may be taxed in Singapore. However, Article 10A(1) of the Singapore Agreement does not preclude taxation of these gains in Australia. Accordingly, such gains may be taxed in Singapore and Australia.
For the purposes of Article 10A(1), Article 4A(2) of the Singapore Agreement defines the term 'real property' as having the meaning which it has under the laws of Australia and Singapore and also includes any interest in or over land whether improved or not. A residential property owned by a resident taxpayer in Singapore is 'real property' as defined in Article 4A(2) of the Singapore Agreement. Therefore, any gain derived by a resident taxpayer from the disposal of the property in Singapore may be taxed in Australia under Article 10A of the Singapore Agreement.
Accordingly, a net capital gain, that is made up of a capital gain made by an Australian resident taxpayer from the disposal of a residential property in Singapore is assessable income under section 6-10 of the ITAA 1997. The capital gain and net capital gain will be calculated in accordance with the CGT provisions in the ITAA 1997.
Date of decision: 22 December 2005Year of income: Year ended 30 June 2006 Year ended 30 June 2007
Legislative References:
Income Tax Assessment Act 1997
section 6-10
subsection 6-10(4)
section 10-5
section 102-5
section 4
Schedule 5
Schedule 5 Article 4A(2)
Schedule 5 Article 10A
Schedule 5 Article 10A(1)
Schedule 5A Related ATO Interpretative Decisions
ATO ID 2002/826
Keywords
Singapore
Singapore agreement
Tax treaty
International tax
Capital gains tax
Foreign sourced income
ISSN: 1445-2782