ATO Interpretative Decision

ATO ID 2003/132 (Withdrawn)

Capital Gains Tax

• This ATO ID is withdrawn from the database because it contains a view in respect of a provision of the Income Tax Assessment Act 1997 that doesn't apply after 11 December 2006. Despite its withdrawal from the database, this ATO ID continues to be a precedential view in respect of decisions up until that time. ATO ID 2009/148 reflects the same view in respect of the replacement provision.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the acquisition date of CGT assets, in respect of which a choice was made under subsection 104-165(2) of the Income Tax Assessment Act 1997 (ITAA 1997) when the taxpayer became a non-resident of Australia, determined under Subdivision 109-A of the ITAA 1997 if the taxpayer returns to Australia and becomes a resident again?

Decision

Yes. The acquisition date of the CGT assets is determined under Subdivision 109-A of the ITAA 1997 and not section 136-40.

Facts

The taxpayer is an Australian citizen. Several years ago the taxpayer ceased to be a resident of Australia for taxation purposes.

At the time of becoming a non-resident, the taxpayer owned a number of assets in respect of which a choice was made under subsection 104-165(2) of the ITAA 1997 to treat the assets as having the necessary connection with Australia.

The taxpayer will be returning to Australia to become a permanent resident again in the near future. The taxpayer still owns the assets.

Reasons for Decision

As a general rule, you acquire a CGT asset when you become its owner (subsection 109-5(1) of the ITAA 1997). More specific rules are set out in subsection 109-5(2) of the ITAA 1997 for CGT assets acquired as a result of a CGT event happening or in section 109-10 of the ITAA 1997 when assets are acquired without a CGT event happening.

If a non-resident individual becomes an Australian resident, a special acquisition rule applies in respect of certain CGT assets owned by the individual just before becoming a resident (section 136-40 of the ITAA 1997). The special acquisition rule is that the taxpayer is treated as having acquired the asset at the time of becoming a resident (subsection 136-40(3) of the ITAA 1997).

However, the rule in section 136-40 of the ITAA 1997 does not apply to assets that have the necessary connection with Australia or assets that were acquired before 20 September 1985 (paragraph 136-40(1)(a) of the ITAA 1997).

When the taxpayer became a non-resident of Australia, a choice was made under subsections 104-165(2) of the ITAA 1997 in respect of a number of assets held at that time. As a result of that choice, those assets are treated as assets having the necessary connection with Australia - subsection 104-165(3) of the ITAA 1997. Therefore, the acquisition rule in section 136-40 of the ITAA 1997 will not apply to them.

This means that the acquisition date of the assets for which the choice was made under subsection 104-165(2) of the ITAA 1997 will be determined under the rules in Subdivision 109-A of the ITAA 1997.

Year of income:  Year ending 30 June 1998 Year ending 30 June 1999 Year ending 30 June 2000 Year ending 30 June 2001 Year ending 30 June 2002 Year ending 30 June 2003

Legislative References:
Income Tax Assessment Act 1997
   subsection 104-165(2)
   subsection 104-165(3)
   Subdivision 109-A
   section 109-5
   subsection 109-5(1)
   subsection 109-5(2)
   section 136-40
   subsection 136-40(3)

Keywords
Acquisition of CGT asset
Capital gains tax
CGT assets
CGT cost base
Capital Gains Tax CoE
CGT asset - necessary connection with Australia

Business Line:  Losses & CGT Centres of Expertise

Date of publication:  15 March 2003

ISSN: 1445-2782