Edited version of private ruling

Authorisation Number: 1011683817140

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Ruling

Subject: Acquisition date of CGT assets- coming to Australia

Is the acquisition date of any assets held by you (other than taxable Australian property and assets acquired before 20 September 1985) when you were gained your permanent residency?

Yes.

Does any change in value of your investments from date of purchase to the date of acquisition in Australia have any taxation consequences in Australia?

No.

This ruling applies for the following periods:

Year ended 30 June 2011

The scheme commences on:

2006

Relevant facts and circumstances

You were born outside Australia.

You immigrated to Australia and are now a permanent resident.

You entered Australia on a provisional Visa, this is a temporary visa.

You gained permanent residency in Australia.

Prior to moving to Australia you had visited on several occasions for short work and private visits.

You hold a number of investments outside of Australia whose value may have changed between purchase and the deemed acquisition date.

You do not hold any shares in employee share schemes.

Relevant legislative provisions

Section 8-1 of the Income Tax Assessment Act 1997

Sub section 995-1(1) of the Income Tax Assessment Act 1997

Section 855-45 of the Income Tax Assessment Act 1997

Section 768-955 of the Income Tax Assessment Act 1997

Social Security Act 1991.

Migration Act 1958

Reasons for decision

Acquisition of assets - becoming an Australian resident

When an individual becomes a resident, they are deemed to have acquired all assets, other than taxable Australian property and assets acquired before 20 September 1985, for the market value of the asset at that time (section 855-45 Income Tax Assessment Act 1997 (ITAA 1997)).

Any capital gain accrued before becoming an Australian resident is thereby protected from Australian CGT.

Furthermore, the 12 month discount rule does not apply until the individual holds the asset for 12 months after the date of acquisition.

However, different rules apply where a foreign resident becomes a 'temporary resident'.

Temporary resident

A temporary resident as defined in subsection 995-1(1) of the ITAA 1997 is a person:

· who holds a temporary visa under the Migration Act 1958, and

· who is not an Australian resident within the meaning of the Social Security Act 1991, and

· whose spouse is not an Australian resident within the meaning of the Social Security Act 1991.

A temporary visa under the Migration Act is any visa other than those which allow the holder to remain in Australia indefinitely, and an Australian resident under the Social Security Act 1991 is a person who:

Resides in Australia; and

· is one of the following:

· an Australian citizen;

· the holder of a permanent visa;

· a special category visa holder who is a protected SCV holder.

Note: a special category visa is a visa that was introduced for New Zealand citizens in 1994.

Application to you between when you arrived and when you gained your permanent residency.

· you entered Australia on a provisional visa, this is a temporary visa under the Migration Act 1958 as it does not allow you to stay indefinitely.

· you were not an Australian resident within the meaning of the Social Security Act 1991 because you were not an Australian citizen, a permanent visa holder or a special category visa holder who is a protected SCV holder,

· your spouse was not an Australian resident within the meaning of the Social Security Act 1991 as they were not an Australian citizen, a permanent visa holder or a special category visa holder who is a protected SCV holder.

Therefore when you entered Australia you were a temporary resident for taxation purposes as defined in subsection 995-1(1) of the ITAA 1997.

Permanent Resident

When a temporary resident ceases to be a temporary resident and remains a resident there are specific rules which apply to each of the CGT assets, other than taxable Australian property and assets acquired before 20 September 1985 owned by that person just before he or she ceased to be a temporary resident (section 768-955 of the ITAA 1997):

· the first element of the cost base and reduced cost base of the asset is its market value at that time;

· the CGT provisions apply to the asset as if the taxpayer had acquired it at the time he or she ceased to be a temporary resident (for example the individual must hold the asset for 12 months from this date to receive the 12 month CGT discount).

You were granted permanent residency in a later year.

For each CGT asset you held, other than taxable Australian property and any asset acquired before 20 September 1985, the acquisition date is taken to be the date you became a permanent resident.

The first element of the cost base of your assets is taken to be the market value of each asset at at that date.

The CGT discount for holding an asset for 12 months is not available to you until 12 months after this date of acquisition.

Investments

You hold a number of investments. You are concerned about any differences in value between when you purchased the bonds and the deemed acquisition date when you became an Australian resident.

Any change of value between purchase and deemed acquisition date does not fall under any consideration within the Australian taxation system as you are not considered to have held the assets for taxation purposes in Australia until the deemed acquisition date.