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Edited version of your written advice
Authorisation Number: 1051227427159
Date of advice: 25 May 2017
Ruling
Subject: The assessability of foreign source investment capital gains and losses
Question:
Will the capital gains and losses resulting from the sale of shares in a foreign Investment Portfolio be assessable in Australia to the Trust?
Answer:
Yes.
This ruling applies for the following periods:
Year ending 30 June 20YY
The scheme commenced on
1 July 20XX
Relevant facts and circumstances
The Trust is a resident of Australia for taxation purposes.
The Trust is managed in Australia.
In the 20YY income year a foreign investment account was opened in the Director's name.
The foreign investment company would not recognise an Australian trust in their reporting and this is the reason why it had to be opened by the Director.
The investment account was funded directly from the Trust.
All income and expenses relating to the foreign investment account have been reported as being the income and expenses of the Trust.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 102-5
Reasons for decision
According to subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) your assessable income includes the income you receive according to ordinary concepts, which is called ordinary income.
Section 102-5 of the ITAA 1997 says that your assessable income includes your net capital gain and section 102-15 says how to apply net capital losses.
Taxation determination 2017/11 (TD 2017/11) considers who should be assessed to interest on bank accounts? While this TD is not expressly deal with income of a trust the principals are relevant in this circumstance.
Paragraph 4 of TD 2017/11 states:
Unless there is evidence to the contrary, it is presumed that joint account holders beneficially own the money in equal shares. Relevant evidence can include information regarding who contributed to the account, in what proportions contributions were made, the nature of the contributions, who drew on the account and who used the money (and accrued interest) as their own property. Evidence may also be provided that joint account holders hold money in the account on trust for other persons.
The account for the foreign investment account was opened in Director of the Trust's name.
As the Director is the owner of the foreign investment account the presumption is that the foreign investment account belongs to the Director.
The Director is the trustee of the Trust and holds the foreign investment account in trust for the Trust.
Money was transferred from the Trust to the foreign investment account.
As trustee of the foreign investment account any capital gains or losses made on the sale of shares in the foreign investment account will be assessable to the Trust.