ATO Interpretative Decision
ATO ID 2009/148
Income Tax
CGT: non-resident becomes resident - assets in respect of which choice was made to treat as having the necessary connection with AustraliaFOI status: may be released
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 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 855-45 of the ITAA 1997.
Facts
Prior to 12 December 2006, 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.
In January 2009, the taxpayer returned to Australia to become a permanent resident again. 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 855-45 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 855-45(3) of the ITAA 1997).
However, the rule in section 855-45 of the ITAA 1997 does not apply to assets that are taxable Australian property or assets that were acquired before 20 September 1985 (subsection 855-40(1) of the ITAA 1997). Section 104-165 of the Income Tax (Transitional Provisions) Act 1997 has the effect that an asset in respect of which a choice was made under subsection 104-165(2) of the ITAA 1997 to treat it as having the necessary connection with Australia is taken to be taxable Australian property for the purposes of section 855-45 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 taken to be taxable Australian property. Therefore, the acquisition rule in section 855-45 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.
Date of decision: 24 November 2009Year of income: Year ended 30 June 2007
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 855-45
subsection 855-45(1)
subsection 104-165(2)
Keywords
Acquisition of CGT asset
Capital gains tax
CGT assets
CGT cost base
Capital Gains Tax CoE
CGT asset with the necessary connection with Australia
ISSN: 1445-2782
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
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).
