ATO Interpretative Decision

ATO ID 2005/110 (Withdrawn)

Income Tax

Capital Gains Tax: small business concessions - maximum net asset value test - non-resident's worldwide assets
FOI status: may be released

This ATO ID is withdrawn from the database because it contains a view in respect of a provision of the Income Tax Assessment Act 1997 that doesn't apply from 12 December 2006. Despite its withdrawal from the database, this ATO ID continues to be a precedential view in respect of decisions for CGT events that happen before 12 December 2006. See ATO ID 2010/126 which reflects the same view in respect of the replacement or rewritten provision for decisions on or after 12 December 2006.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 2005

Year 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

Business Line: Losses and Capital Gains Tax Centre of Expertise

Date of publication: 6 May 2005

ISSN: 1445-2782

history

	Date:	Version:
	22 March 2005	Original statement
You are here	15 January 2010	Archived

Copyright notice

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).