Tax Law Improvement Act (No. 1) 1998 (46 of 1998)

Schedule 1   Amendment of the Income Tax Assessment Act 1997

1   Part 3-3 Division 136

Division 136 - Non-residents

Table of Subdivisions

Guide to Division 136

136-A Making a capital gain or loss

136-B Becoming a resident

Guide to Division 136

136-1 What this Division is about

A non-resident makes a capital gain or loss only if a CGT event happens to a CGT asset that has the necessary connection with Australia. There are also rules dealing with what happens when a non-resident becomes a resident.

Subdivision 136-A - Making a capital gain or loss

Table of sections

136-5 What if you are a non-resident just before a CGT event

136-10 Making a capital gain or loss from most CGT events

136-15 Making a capital gain or loss from CGT events D1 and E9

136-20 Those events you cannot make a capital gain or loss from

136-25 When an asset has the necessary connection with Australia

136-30 Reducing a capital gain or loss from a business asset

[This is the end of the Guide.]

136-5 What if you are a non-resident just before a CGT event

This Subdivision sets out what happens if just before a *CGT event happens:

(a) you are an individual or a company that is not an Australian resident; or

(b) you are the trustee of a trust that is not a *resident trust for CGT purposes.

136-10 Making a capital gain or loss from most CGT events

You make a *capital gain or *capital loss from a *CGT event set out in this table only if the thing referred to in the relevant row of the table has the *necessary connection with Australia.

The last column lists each category of *CGT asset having the *necessary connection with Australia that is relevant to the event.

Note 1: Special rules apply to CGT events D1 and E9: see section 136-15.

Note 2: There are some CGT events for which you cannot make a capital gain or loss: see section 136-20.

Note 3: For the categories of CGT assets having the necessary connection with Australia: see section 136-25.

136-15 Making a capital gain or loss from CGT events D1 and E9

(1) You make a *capital gain or *capital loss from *CGT event D1 (about creating contractual or other rights) only if one of the items in this table is satisfied.

(2) You make a *capital gain or *capital loss from *CGT event E9 (about creating a trust over future property) only if one of the items in this table is satisfied.

136-20 Those events you cannot make a capital gain or loss from

This table sets out those *CGT events from which you cannot make a *capital gain or *capital loss.

136-25 When an asset has the necessary connection with Australia

There are 8 categories of *CGT assets having the necessary connection with Australia . They are set out in this table.

136-30 Reducing a capital gain or loss from a business asset

(1) The *capital gain or *capital loss you make from a *CGT asset that you have used at any time in carrying on a *business through a *permanent establishment in Australia is reduced if you used it in this way for only part of the period from when you *acquired it to when the CGT event happened.

(2) The gain or loss is reduced by this fraction:

Number of days the asset was not used in the way described in subsection (1) / Number of days in that period

Subdivision 136-B - Becoming a resident

Table of sections

136-40 Individual or company becomes resident

136-45 Trust becomes a resident trust

136-50 CFC becomes an Australian resident

136-40 Individual or company becomes resident

(1) If you become an Australian resident, there are rules relevant to each *CGT asset that you owned just before you became an Australian resident, except an asset:

(a) having the *necessary connection with Australia; or

(b) that you *acquired before 20 September 1985.

(2) The first element of the *cost base and *reduced cost base of the asset (at the time you become an Australian resident) is its market value at that time.

(3) Also, Part 3-1 and this Part apply to the asset as if you had *acquired it at the time you became an Australian resident.

136-45 Trust becomes a resident trust

(1) If a trust becomes a *resident trust for CGT purposes, there are rules relevant to each *CGT asset that the trustee owned just before the trust became a resident trust for CGT purposes, except one:

(a) having the *necessary connection with Australia; or

(b) that the trustee *acquired before 20 September 1985.

(2) The first element of the *cost base and *reduced cost base of the asset (at the time the trust becomes a *resident trust for CGT purposes) is its market value at that time.

(3) Also, Part 3-1 and this Part apply to the asset as if the trustee had *acquired it at the time the trust became a *resident trust for CGT purposes.

Exception

(4) This section does not apply to a trust if, just before it became a *resident trust for CGT purposes, it was a *CFT because of paragraph 342(a) of the Income Tax Assessment Act 1936.

Note: This section is disregarded in calculating the attributable income of a trust: see section 102AAZB of the Income Tax Assessment Act 1936.

136-50 CFC becomes an Australian resident

(1) This section applies to a *CFC that stops at a time (the residence change time ) being a resident of a *listed country or an *unlisted country and becomes an Australian resident.

(2) Section 136-40 does not apply to the *CFC.

(3) The modifications of this Part and Part 3-1 in sections 411 to 414 (inclusive) of the Income Tax Assessment Act 1936 have the effect they would have, in relation to each *commencing day asset owned by the *CFC at the residence change time, if those modifications were used to work out the taxable income of the CFC rather than its *attributable income.

(4) However, if a *capital gain on a *commencing day asset of the *CFC (for a period before the residence change time) was subject to tax (within the meaning of Part X of the Income Tax Assessment Act 1936) in a *listed country, the modifications of this Part and Part 3-1 in sections 411 to 414 (inclusive) of the Income Tax Assessment Act 1936 have the effect they would have in relation to the asset if:

(a) those modifications were used to work out the taxable income of the CFC rather than its *attributable income; and

(b) the *commencing day of the CFC were the residence change time.

Note: This section is disregarded in calculating the attributable income of a CFC: see section 410 of the Income Tax Assessment Act 1936.