Edited version of private advice

Authorisation Number: 1051716842215

Date of advice: 13 August 2020

Ruling

Subject: Temporary resident - capital gains tax

Question

Can you disregard the capital gain from the disposal of units in an investment fund on the basis that you were a temporary resident?

Answer

Yes

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You and your spouse were born in overseas.

You and your family moved to Australia in 20xx under temporary visas.

You acquired units from an investment fund (Fund) in 20xx.

You disposed of all units on in 20yy and you made a capital gain.

You and your associates held less than 10% of interests of the Fund.

You were a temporary resident of Australia until after the units were sold.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 768-R

Income Tax Assessment Act 1997 Section 768-915

Income Tax Assessment Act 1997 Division 855

Income Tax Assessment Act 1997 Subsection 855-10(1)

Income Tax Assessment Act 1997 Section 995-1

Reasons for decision

Temporary Resident

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) states that you are a temporary resident of Australia if:

·         you hold a temporary visa granted under the Migration Act 1958;

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

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

Under the Social Security Act 1991, an Australian resident is a person who is living in Australia and is an Australian citizen, a permanent visa holder or a protected special category visa holder.

In your case, you and your spouse held temporary visas (including Bridging visas) until your permanent visa granted. Your temporary visas were granted under the Migration Act 1958 and you were not Australian residents within the meaning of the Social Security Act 1991.

Therefore, you were a temporary resident of Australia.

Capital gains tax

Subdivision 768-R of the ITAA 1997 provides that the foreign source income (apart from income derived from working overseas) and capital gains of a temporary resident are not taxable in Australia.

Further, section 768-915 of the ITAA 1997 allows a taxpayer to disregard a capital gain or capital loss they make from a capital gains tax (CGT) event if they are a temporary resident when, or immediately before, the CGT event happens provided the capital gain or capital loss would have been disregarded under Division 855 of the ITAA 1997 if the taxpayer were a foreign resident at that time.

A capital gain or capital loss that a taxpayer makes from a CGT event happening in relation to non-taxable Australian property is disregarded under subsection 855-10(1) of the ITAA 1997 if the taxpayer is a foreign resident, or the trustee of a foreign trust for CGT purposes, just before the CGT event happens.

In your case, you were a temporary resident who disposed of units in an investment fund that were non-taxable Australian property and the capital gain or loss you made from the disposal would have been disregarded if you were a foreign resident.

Therefore, you can disregard the capital gain you made from the disposal of the units.