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Ruling

Subject: Residency for tax purposes and capital gains tax

Question:

Are you subject to capital gains tax on the sale of your properties in Country Y as a temporary resident of Australia?

Answer:

No.

This ruling applies for the following periods:

Year ending 30 June 2013

The scheme commenced on:

1 July 2012

Relevant facts and circumstances

You and your spouse are citizens of Country Y.

You left Country Y in June 2008 to come to Australia to work.

You and your spouse have a Special Category Visa this visa is not a protected visa.

You and your spouse are not residents of Australia for the purposes of the Social Security Act.

You have two properties in Country Y which you will be selling.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 768-910.

Income Tax Assessment Act 1997 Section 768-915.

Income Tax Assessment Act 1997 Section 104-10.

Reasons for decision

Temporary residents

You are a temporary resident if you:

· hold a temporary visa granted under the Migration Act 1958

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

· do not have a spouse who is an Australian resident within the meaning of the Social Security Act 1991.

The Social Security Act 1991 defines an Australian resident as a person who resides in Australia and is an Australian citizen, the holder of a permanent visa, or a protected special category visa holder.

You are not a citizen of Australia, you do not hold a permanent visa or a protected special category visa holder.

Therefore, you are a temporary resident of Australia as you do not meet the definition of a resident under the Social Security Act 1991.

Capital gains tax (CGT)

You can only make a capital gain or loss if a capital gains tax CGT event happens. The most common event is CGT event A1. CGT event A1 happens when you dispose of an asset, for example a house, to another entity. 

Taxable Australian property

If you are a temporary resident, you are subject to CGT if a CGT event happens on or after 12 December 2006 to a CGT asset that is taxable Australian property. 

Taxable Australian property includes:

· a direct interest in real property situated in Australia (for example, land, houses or apartments);

· the business assets of an Australian permanent establishment of a foreign resident, and

· an indirect Australian real property interest - which is an interest in an entity (including a foreign entity, where the taxpayer and their associates hold 10% or more of the entity and the value of your interest is wholly or principally attributable to Australian real property).

In your case, you intend to sell your properties in Country Y. As the properties in Country Y are not a taxable Australian property, CGT will not apply.

Therefore, the proceeds received from the sale of the properties in Country Y will not be subject to tax in Australia.