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Edited version of private advice
Authorisation Number: 1052416132157
Date of advice: 02 July 2025
Ruling
Subject: Capital gains tax
Question 1
Is the Trust entitled to the CGT exemption under section 855-10 of the Income Tax Assessment Act 1997?
Answer 1
No.
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ended 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
The Trust is a discretionary trust.
The Trust was set up to purchase and hold shares.
The trustee for the Trust is a company incorporated in Australia.
The appointer and beneficiaries of the Trust moved overseas a number of years ago and reside there.
The trustee has written to the share registries to have non-resident dividend/distributions withholding tax withheld.
Tax has been withheld for a number of income years.
Shares have been acquired subsequently via dividend reinvestment plans.
Some of these shares have now been sold and the capital gains distributed to non-resident beneficiaries.
Relevant legislative provisions
Income Tax Assessment Act 1936 subsection 6(1)
Income Tax Assessment Act 1997 section 855-10
Income Tax Assessment Act 1997 section 995-1
Reasons for decision
Under section 855-10 of the Income Tax Assessment Act 1997 (ITAA 1997), a CGT exemption for assets that are not taxable Australian property may apply to a 'foreign trust for CGT purposes'.
The terms resident and resident of Australia are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936).
Section 995-1 of the ITAA 1997 defines 'foreign trust for CGT purposes' to mean a trust that is not a 'resident trust for CGT purposes'.
Under the definition of 'resident trust for CGT purposes' in section 995-1 of the ITAA 1997, a trust that is not a unit trust will be a resident trust for CGT purposes if a trustee is an Australian resident OR the central management and control of the trust is in Australia.
The Trust is a discretionary trust.
The definition of a resident in subsection 6(1) of the ITAA 1936 includes a company which is incorporated in Australia.
The trustee company of the Trust was incorporated in Australia.
The company is therefore a resident of Australia under subsection 6(1) of the ITAA 1936.
As the trustee of the Trust is an Australian resident, the Trust will be a 'resident for CGT purposes' under the definition in section 995-1 of the ITAA 1997,.
As the Trust is not a 'foreign trust for CGT purposes', the exemption to CGT provided by section 855-10 of the ITAA 1997 will not apply to the shares of the Trust.
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